Real Estate Laws and Regulations in Luxembourg

Published on October 2, 2025 and written by Cyril Jarnias

Luxembourg, a small country at the heart of Europe, attracts numerous real estate investors thanks to its economic and political stability. However, before diving into acquiring property in the Grand Duchy, it is essential to thoroughly understand the current laws and regulations. This article will guide you through the main legal and tax aspects you need to know to invest confidently in Luxembourg real estate.

Buying Property in Luxembourg: What Rights Do Foreigners Have?

Good news for foreign investors: Luxembourg offers a legal framework favorable to real estate acquisition by non-residents. Unlike some countries that impose restrictions on foreign buyers, the Grand Duchy allows any individual or legal entity, regardless of nationality, to freely acquire real estate within its territory.

This openness is part of Luxembourg’s attractiveness policy, which seeks to attract foreign investment and develop its economy. Thus, whether you are a Luxembourg resident, a European citizen, or a national of a third country, you enjoy the same rights to buy an apartment, house, or land in Luxembourg.

However, it is important to note that some administrative formalities may differ depending on your resident or non-resident status. For example, non-residents will generally need to provide more substantial financial guarantees when applying for a mortgage with Luxembourg banks.

In summary, Luxembourg offers a conducive environment for real estate investment for foreigners, with few barriers to entry. This open policy helps to energize the Luxembourg real estate market and attract international capital.

The Legal Framework of Luxembourg Real Estate: The Essential Rules

The Luxembourg real estate market is governed by a set of laws and regulations aimed at protecting the interests of buyers, sellers, and tenants. Here are the main legal provisions you should know:

1. The Law of September 21, 2006, on Residential Leases

This fundamental law governs the relationship between landlords and tenants. It defines the rights and obligations of each party, particularly regarding lease duration, rent, rental charges, and contract termination. The law also provides protective measures for tenants, such as rent control in certain areas or limitations on the landlord’s grounds for termination.

2. The Law of October 22, 2008, on Emphyteusis and Superficies Rights

This legislation regulates two specific forms of real estate ownership in Luxembourg: emphyteusis (very long-term land lease) and superficies (the right to build on someone else’s land). These mechanisms offer interesting alternatives to traditional purchase, especially for large-scale real estate projects.

3. The Law of September 21, 2006, on the Housing Pact

This law aims to promote access to housing for all residents of Luxembourg. It notably provides incentive measures for the construction of affordable housing and the establishment of public-private partnerships in the real estate sector.

4. The Grand Ducal Regulation of March 8, 2017, concerning the Content of the Specifications

This regulation defines the mandatory information that must be included in the specifications when selling a property to be completed (VEFA). It ensures better protection for buyers by requiring increased transparency regarding the technical and financial characteristics of the property.

5. The Law of October 22, 2008, on Municipal Planning and Urban Development

This law governs urban planning and land development in Luxembourg. It defines the rules for construction, renovation, and building extensions, as well as the procedures for obtaining necessary permits (building permits, subdivision permits, etc.).

These laws and regulations form the legal foundation of Luxembourg real estate. Knowledge of them is essential for any investor wishing to operate in this market. It is recommended to consult a lawyer specialized in real estate law to ensure proper understanding and compliance with these legal provisions.

Real Estate Taxation in Luxembourg: An Attractive Regime Under Conditions

The Luxembourg tax system is renowned for its attractiveness, including in the real estate sector. However, it is important to understand the different applicable taxes and duties to optimize your investment. Here are the main aspects of real estate taxation in Luxembourg:

1. Registration and Transcription Duties

When purchasing a property, the buyer must pay registration duties (6% of the purchase price) and transcription duties (1% of the purchase price). These duties are due at the time of signing the notarial deed. Note that for properties located in Luxembourg City, an additional municipal registration duty of 3% applies.

2. Property Tax

The property tax is an annual tax due by the owner of a property. Its amount varies depending on the municipality and the characteristics of the property. Generally, this tax remains relatively moderate in Luxembourg compared to other European countries.

3. Tax on Rental Income

Rental income is subject to personal income tax. The tax rate depends on the taxpayer’s overall income and can reach up to 42% for the highest bracket. However, it is possible to deduct certain expenses (loan interest, maintenance costs, etc.) to reduce the taxable base.

4. Real Estate Capital Gains

The capital gain realized from the sale of a property is taxed at a maximum rate of 20.9% (including the employment fund contribution). However, reductions and exemptions exist, particularly for the primary residence or in the case of long-term ownership.

5. VAT on New Constructions

The construction of a new home is subject to VAT at a rate of 17%. However, a super-reduced rate of 3% applies to primary residences, up to a limit of €50,000 per dwelling.

6. Tax Credit for Rental Property Investment

Luxembourg offers an attractive tax credit for investors who acquire or build housing intended for rental. This credit can reach up to 20% of the investment, under certain conditions.

The Luxembourg tax regime therefore offers interesting opportunities for real estate investors, while remaining competitive at the European level. However, the complexity of some tax mechanisms often makes it necessary to consult a specialized tax advisor to optimize your investment.

Rights and Obligations of Property Owners in Luxembourg: What You Need to Know

Being a property owner in Luxembourg comes with significant rights, but also responsibilities that should not be overlooked. Here is an overview of the main points to know:

1. Right of Ownership

The right of ownership is strongly protected in Luxembourg. As an owner, you have the right to use, enjoy, and freely dispose of your property, within the limits set by law. This includes the right to rent, sell, or transform your property.

2. Pre-emption Right

In some cases, particularly for properties located in urban development zones, public authorities may have a pre-emption right. This means they have priority to purchase the property in case of sale, under the same conditions as those offered by a potential buyer.

3. Maintenance Obligations

The owner has the obligation to maintain their property and keep it in good condition. This applies to both the interior and exterior of the building. In the case of a rental, some repairs may be the tenant’s responsibility, but major works generally remain the owner’s responsibility.

4. Compliance with Safety and Habitability Standards

Owners must ensure that their property complies with the safety and habitability standards in force in Luxembourg. This notably includes electrical standards, fire safety devices, and thermal insulation standards for new constructions.

5. Tax Obligations

As mentioned earlier, owners are subject to various tax obligations, notably the payment of property tax and the declaration of rental income if applicable.

6. Co-ownership

In the case of a property in co-ownership (e.g., an apartment in a building), the owner must comply with the co-ownership regulations and contribute to common charges. They also have the right to participate in general co-ownership meetings and vote on decisions concerning common areas.

7. Right to Lease

Owners have the right to lease their property but must comply with the provisions of the law on residential leases. This notably includes rules on rent setting, lease duration, and grounds for termination.

8. Civil Liability

Owners can be held liable for damages caused by their property (for example, if roof tiles fall on a passerby). It is therefore highly recommended to take out owner’s liability insurance.

These rights and obligations form a balanced legal framework, aiming to protect both the interests of owners and those of the community. It is important for every property owner in Luxembourg to be well aware of these provisions to fully exercise their rights while respecting their legal obligations.

Regulatory Developments: Recent and Upcoming Changes in Luxembourg Real Estate

The regulatory framework for real estate in Luxembourg is regularly evolving to adapt to economic, social, and environmental challenges. Here are the main recent developments and expected changes in the near future:

1. Strengthening the Fight Against Real Estate Speculation

Faced with the continuous rise in real estate prices, the Luxembourg government has implemented several measures aimed at combating speculation. Among them are:

– Increasing the capital gains tax on real estate for sales made within two years of acquisition. – Introducing a tax on the holding of undeveloped buildable land, to encourage owners to put them on the market.

2. Co-ownership Reform

A reform of the law on co-ownership is being developed. It aims in particular to:

– Simplify decision-making in general co-ownership meetings. – Clarify the responsibilities of the managing agent and the co-owners. – Facilitate the implementation of energy renovation works in co-owned buildings.

3. Strengthening Energy Standards

As part of the ecological transition, Luxembourg is gradually strengthening its requirements regarding the energy performance of buildings. New constructions must now comply with very strict standards, and tax incentives are being implemented to encourage the energy renovation of the existing real estate stock.

4. Development of Emphyteutic Lease

To facilitate access to property while controlling land costs, the government encourages the development of the emphyteutic lease. This mechanism allows for the acquisition of a home without buying the land, which remains the property of the state or the municipality.

5. Regulation of Short-Term Rentals

Faced with the development of platforms like Airbnb, Luxembourg is considering the implementation of a specific regulatory framework for short-term rentals. The goal is to preserve the housing supply for residents while allowing the controlled development of this activity.

6. Digitalization of Real Estate Procedures

Luxembourg continues its digitalization policy, including in the real estate sector. Projects are underway to digitize certain administrative procedures related to real estate (building permit applications, tax declarations, etc.).

7. Reform of Real Estate Taxation

A review is underway regarding a possible reform of real estate taxation, including the idea of revising the cadastral values used as the basis for calculating the property tax.

These regulatory developments demonstrate Luxembourg’s commitment to maintaining a dynamic real estate market while addressing current challenges: housing accessibility, ecological transition, digitalization. It is crucial for investors to stay informed of these changes to adapt their investment strategies accordingly.

In conclusion, the Luxembourg real estate market offers great opportunities for investors, thanks to a stable legal framework and generally attractive taxation. However, the complexity of some regulations and the constant evolution of the sector make a good knowledge of the local context indispensable. Whether you are a foreign investor or a Luxembourg resident, it is highly recommended to surround yourself with professionals (notary, lawyer, tax advisor) to successfully carry out your real estate projects in the Grand Duchy.