Luxembourg

Land-locked Luxembourg is the only remaining sovereign Grand Duchy, with a constitutional monarch. Surrounded by France, Belgium and Germany, it is made up of 12 canons which divide into 102 communes.

The city of Luxembourg is the largest commune with city status. It gained UNESCO World Heritage Site status in 1994.

The country’s main industry was steel manufacturing, but now it is one of the Europe’s leading financial centres, with a favourable corporate tax regime. The government has focused on developing the knowledge economy too.

One of the wealthiest countries by GDP (PPP) per capita, residents and visitors enjoy low crime rates and some of the highest standards of living in the world. French is the legal language, but Luxembourgish and German are also official languages. English is widely spoken.

Real Estate in Luxembourg can be expensive compared to some other countries, as available property is scarcer. Foreigners are entitled to own property, with no nationality restriction on land ownership. The market is seen as stable with a steady increase in long-term prices, which makes it of interest to some investors.

Most of the main banks offer mortgages to foreign residents, subject to terms including evidence of regular income. Third country nationals often require larger deposits. Property tax is favourable compared to neighbouring countries and there are tax deductions permitted on mortgage interest. If a company owns the real estate asset, there may be ways to buy through share purchase that avoid paying the additional costs related to buying, but this may change and you need to consult a qualified specialist.

The buying process involves a preliminary sale agreement or off-plan or Preliminary Purchase Agreement for re-sale once the offer is accepted. This is a legally binding agreement committing to buy the property subject to terms laid out (e.g. mortgage approval). It should lay out what is included in the sale in detail (e.g. land, garden, garage/ parking, fixtures & fittings) and there is a forfeit if the agreement is broken. Check these are regulated to protect your buyer’s rights. No down payment is exchanged between parties at this stage.

Afterward, a Notary is appointed for legal process and draws up a notarial deed of acquisition. The Notary represents both buyer and seller. Additional resale purchase costs vary 7-12%. Your agent will be able to advise.

Commune Tax (annual Property tax set locally) is ongoing for property owners, and other costs include utilities and insurance. For non-residents, there is tax liability for any income received from the property in Luxembourg.

The rental system is pro-tenant and most property is let via an estate agent. You need to declare to the municipality if you rent out furnished accommodation and must comply with certain public health requirements. Consult Luxembourg Government website.

Capital Gains tax does apply in Luxembourg, with some exemptions and allowances. For example, sale of principal residence. Or allowances for property not main residence, owned for two or more years. Capital Gains for individuals on property sales are taxed as miscellaneous income, subject to personal income tax from 0-42% dependent on income. Additional tax charges may apply.

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