The doubling of the reimbursement ceiling for the super-reduced VAT rate of 3%, announced in the Tripartite Agreement of June 2026, is one of the most significant measures for the housing sector in Luxembourg.

The Luxembourg government is continuing its efforts to support housing and revitalise the property market. Among the measures announced as part of the Tripartite Agreement of June 2026 is a particularly eagerly awaited decision: the doubling of the reimbursement ceiling for the tax benefit linked to the super-reduced VAT rate of 3%, which rises from €50,000 to €100,000.

However, its entry into effect remains subject to the approval of the European Commission, whose approval is required before it can be implemented.

What is the super-reduced VAT rate of 3% in Luxembourg?

In Luxembourg, certain residential property projects are eligible for a super-reduced VAT rate of 3% instead of the standard rate of 17%.

This tax relief applies in particular to certain new builds, purchases of new homes or renovation works, subject to compliance with the conditions set by the Administration of Registration, Domains and VAT (AED).

The aim of this scheme is simple: to reduce the cost of housing for individuals and encourage home ownership.

Until now, the tax benefit was capped at €50,000 per property. However, this cap had become increasingly out of step with the reality of the Luxembourg property market, which has seen a significant rise in construction, material and labour costs.

What changes with the new €100,000 threshold

Point 8 of Pillar I of the Tripartite Agreement of June 2026 explicitly provides for the doubling of the threshold for the refund of the super-reduced 3% VAT rate, from €50,000 to €100,000.

In practical terms, this means that individuals will be able to benefit from a much greater tax advantage before reaching the maximum authorised limit. This measure is part of a series of initiatives designed to support the housing sector, encourage residential investment and improve access to home ownership in Luxembourg.

What does this mean in practical terms for buyers?

For many households, this reform could have a direct impact on the budget allocated to their property project.

Let’s take an example. A buyer who is having a house built or purchasing a new-build property with high construction costs could previously reach the €50,000 threshold relatively quickly. Once this limit was reached, any additional expenditure was subject to the standard VAT rate.

With the ceiling raised to €100,000, a much larger portion of the project will be eligible for the super-reduced VAT rate of 3%.

This represents a potential saving of tens of thousands of euros compared to the old system.

For a household, this financial margin can enable them to:

• increase their purchase budget;
• include more features or finishes in their project;
• fund energy-efficiency renovation work;
• or simply reduce the amount of their bank loan.

In a property market where every euro counts, this change provides a boost for future homeowners.

Why is this measure being introduced now?

For several years now, Luxembourg has been facing a number of simultaneous challenges:

• a significant rise in construction costs;
• a slowdown in the property market;
• increasing difficulties for first-time buyers;
• a growing need to renovate the existing housing stock.

The government has therefore chosen to strengthen certain existing tax mechanisms rather than create a new scheme. Doubling the ceiling for the reduced VAT rate on housing is a direct response to this approach: making property projects more accessible without altering the very principle of the super-reduced rate.

Renovations could also qualify

This measure does not apply solely to new-build properties. Homeowners undertaking major renovations may also be eligible, subject to the conditions set out in the relevant regulations.

At a time when work to improve the energy efficiency of buildings is becoming a priority, increasing this tax benefit could encourage more households to modernise their homes.

Insulation, replacement of technical installations or complete renovation of an older property: these are all projects whose costs can quickly run into several hundred thousand euros. The new €100,000 ceiling therefore offers greater flexibility when considering these investments.

3% VAT on housing: who will be eligible for the new cap?

The precise implementation details will need to be set out in the implementing regulations following the Tripartite Agreement.

However, the principle of the preferential VAT rate for housing remains unchanged: beneficiaries must comply with the conditions defined by the relevant authorities regarding the use of the property and the project’s eligibility criteria. Individuals wishing to undertake a property project would be well advised to seek information from the relevant authorities or property professionals, such as our estate agency New Immo, in order to assess their specific situation.

This development represents a significant opportunity for households planning to buy a new-build home, build their main residence or carry out major renovation works. Against a backdrop of sharply rising construction and renovation costs in recent years, this measure could enable many homeowners to make substantial savings.

At New Immo, we closely monitor developments in the Luxembourg property market and new government measures so that we can support our clients with advice tailored to their specific projects. Contact us now if you have any questions!