Taxing real estate gains: take advantage of reductions until December 31ST 2018

On December 31 st, 2018, the legal disposition voted in June 2016 establishing lighter taxing of real estate gains will come to an end for the sale of a building other than one’s principal habitation. In other words, the proprietors have no time to lose to benefit of this aid. 

July 14, 2016, the project of the law n° 6983 was voted by the Chamber of Deputies. It aims to establish a favourable tax climate for the sale of building plots and housing to increase supply and boost the real estate market. Bill n° 6983 provides advantageous temporary measures that are to be applied from July 1, 2016 to December 31, 2017. Real estate gains earned on built and non-built properties that are part of the private heritage of tax-payers are then imposed at a rate corresponding to a fourth of the global rate. Remember that up until now the plan provided for an income tax referred to in article 99 ter of the TIR at a rate corresponding to half of the global rate.

A helping hand for proprietors

For public authorities, this transitional disposition is intended to boost the housing market which remains tense in the Grand-Duchy: the supply of dwellings (houses and apartments) and constructible land for sale is in fact below the demand. More concretely, the Luxembourg government wants to increase the supply of lands and buildings (part of the individual private heritage) by offering a tax benefit.  
In fact, until December 31, 2018, the gains on sales of constructed or undeveloped lands are taxed at only a fourth of the basic tax rate. In other words, the maximum tax rate is 10% for revenues generated during the stated period.
Enfin, ce sont les dates de signature de l’acte notarié qui feront foi. D’où l’urgence à ce que l’ensemble des procédures soit bouclé avant le dernier jour de l’année.
By establishing this favourable fiscal climate for a reduced time span, the government has set only two exclusive conditions: are concerned physical persons, i.e. individuals; gains of speculation (less than two years after purchase) are not within the scope of this transitory disposition.
Finally, it is the dates of the signature of the deeds of sale that prevail. Hence the urgency that all procedures be completed before the last day of the year.


By definition, the gains are the positive difference between the sales price and the purchase price.  The income from the gains adds to taxpayer’s other revenue. 
In the Grand-Duchy, a specific tax applies to the gains if it does not concern the principal residence. Tax on gains = ¼ x average rate resulting from all revenues.
The gains are amputated by a ten-year deduction of 50,000 euros (100,000euros for a couple jointly imposed; however, this deduction is reduced by the amount of the deductions granted over the last ten years, in accordance with article 130 (4) ITA Or even a single deduction of 75,000 when the property acquired directly by succession has been used as the principal residence by the parents of the assignor, in accordance with article 130 (5) ITA. 
L’économie réalisée pourra ainsi être investie (avec le reste de la plus-value) dans des produits financiers, mais surtout, comme le souhaite le gouvernement, dans de l’immobilier neuf destiné à la location… Ce qui générera de nouveaux revenus, modernisera son patrimoine, et élargira l’offre sur le très tendu marché immobilier du Grand-Duché. 
Savings can be invested (with the rest of the capital gain) in financial products, but above all, as the government wishes, in new real estate destined for rental…Which will generate new revenues, modernize one’s heritage, and will expand the offer on the very tense real estate market of the Grand-Duchy.

Early in 2019, the tax rate on gains will rise again to 20% (global half-rate). It is therefore important to sell one’s property (except for one’s principal residence) during 2018.