Tax Benefits For Real Estate Investors In Luxembourg

Published on October 1, 2025 and written by Cyril Jarnias

Luxembourg, a small country at the heart of Europe, has long been recognized as a premier financial hub. But did you know that the Grand Duchy also offers a particularly attractive tax environment for real estate investors? In this article, we will explore in detail the tax advantages that make Luxembourg a top destination for international real estate investment.

Advantageous Local Tax Regime: The Cornerstone of Luxembourg’s Appeal

Luxembourg stands out with a particularly favorable local real estate taxation system, making it a sought-after destination for investors worldwide.

Competitive Tax Rates on Rental Income

In Luxembourg, rental income is subject to personal income tax, with a maximum marginal rate of 42% for incomes exceeding €200,004 per year. However, several tax deductions significantly reduce the taxable base:

• Deduction of loan interest related to property acquisition
• Deduction of maintenance and repair costs
• Property depreciation (typically 2% per year for residential buildings)

These deductions can substantially lower the effective tax burden on rental income, making real estate investment in Luxembourg particularly attractive.

Low Taxation on Real Estate Capital Gains

Luxembourg applies a favorable tax regime to real estate capital gains. If the property has been held for more than two years, the gain from the sale benefits from a €50,000 allowance (€100,000 for a couple). Additionally, the applicable tax rate is reduced by half compared to the taxpayer’s marginal income tax rate.

Advantageous Inheritance Tax

Luxembourg also offers significant tax benefits for real estate inheritance. Inheritance tax in direct line (between parents and children) is completely exempt, allowing for optimized wealth transfer.

Attractive International Taxation: Luxembourg, Hub for European Real Estate Investment

Luxembourg has positioned itself as a nerve center for international real estate investment through its advantageous taxation and extensive network of tax treaties.

An Extensive Network of Tax Treaties

The Grand Duchy has signed over 80 tax treaties aimed at avoiding double taxation. These agreements allow foreign investors to benefit from reduced rates or exemptions on real estate income earned in Luxembourg, while avoiding double taxation in their country of residence.

Optimized Investment Structures

Luxembourg offers several real estate investment vehicles that are particularly attractive from a tax perspective:

• Family Wealth Management Companies (SPF): exempt from corporate tax and withholding tax on dividends
• Specialized Investment Funds (SIF): benefiting from reduced taxation and great flexibility
• Risk Capital Investment Companies (SICAR): exempt from tax on capital gains from the sale of securities

These structures allow international investors to optimize their taxation while benefiting from Luxembourg’s stability and reputation.

Attractive Taxation for Expatriates

Luxembourg has implemented a special tax regime for highly qualified expatriates, allowing them to benefit from tax exemptions on certain expatriation-related benefits. This measure enhances the country’s appeal for international real estate investors looking to relocate.

Moderate Local Taxes: An Additional Advantage for Property Owners

In addition to an overall advantageous tax system, Luxembourg stands out with relatively moderate local taxes on real estate property.

One of the Lowest Property Taxes in Europe

Property tax in Luxembourg is calculated based on the unit value of the property, which has not been reassessed since 1941. This particularity makes Luxembourg’s property tax particularly low compared to other European countries. The rate varies by municipality but generally remains very competitive.

No Residence Tax

Unlike many European countries, Luxembourg does not apply a residence tax. This absence represents significant savings for owner-occupiers and tenants, making real estate investment even more attractive.

Moderate Registration Fees

Registration fees when purchasing real estate in Luxembourg amount to 6% of the property value, plus a 1% transcription tax. These rates remain competitive compared to many European countries, particularly France or Belgium.

Luxembourg vs Other Destinations: A Winning Choice for Real Estate Investment

To better understand Luxembourg’s tax attractiveness for real estate investment, it’s interesting to compare it with other popular destinations.

Luxembourg vs France

• Rental income taxation: Luxembourg offers more generous deductions, often resulting in lower effective taxation than in France
• Real estate capital gains: The Luxembourg regime is generally more advantageous, particularly due to the €50,000 allowance and the halving of the tax rate
• Property tax: Significantly lower in Luxembourg than in France
• Residence tax: Non-existent in Luxembourg, unlike France where it remains for secondary residences

Luxembourg vs Germany

• Rental income taxation: Tax rates are generally similar, but Luxembourg offers more deduction possibilities
• Real estate capital gains: The Luxembourg regime is more advantageous, with Germany taxing capital gains at the marginal tax rate without specific allowance
• Property tax: Lower in Luxembourg than in Germany

Luxembourg vs United Kingdom

• Rental income taxation: The Luxembourg system generally offers a lower tax burden thanks to its numerous deductions
• Real estate capital gains: The Luxembourg regime is more advantageous, with the UK applying rates up to 28% on real estate capital gains
• Stamp Duty: Registration fees in Luxembourg are generally lower than UK Stamp Duty, especially for high-value properties

Conclusion: Luxembourg, A Strategic Choice for International Real Estate Investment

Luxembourg offers a particularly favorable tax environment for real estate investors, combining advantageous local taxation, extensive international tax treaties, and moderate property taxes. These benefits, combined with the country’s political and economic stability, make it a top destination for investors seeking to optimize their international real estate portfolio.

However, it’s important to note that taxation is just one aspect among others to consider when making a real estate investment. The quality of the local real estate market, economic growth prospects, and demographic trends are all factors to take into account to guarantee investment success.

Luxembourg continues to innovate to maintain its attractiveness. The country is currently working on a tax reform aimed at further simplifying the system and making it even more competitive internationally. These ongoing efforts to improve the tax and regulatory environment demonstrate Luxembourg’s commitment to remaining a preferred destination for international real estate investment in the years to come.