The Luxembourg government has adopted a series of new laws in relation to the housing policy with the objective of encouraging the supply of housing through precise and targeted measures. The new laws reduce the tax burden applicable on the sale of building lands, residential buildings as well as on the purchase and construction of residential buildings.
|Works||Creation of housing||Renovation following the acquisition||Housing renovation least 20 years old|
|Load-bearing units used for the stability and solidity of the building||Yes||Yes||Yes|
|Units used for purposes of enclosure, cover and water tightness, including screeds||Yes||Yes||Yes|
|Construction or demolition of interior walls separating||Yes||Yes||Yes|
|Breakthrough new doors or windows||Yes||Yes||Yes|
|Walling of existing doors or windows||Yes||Yes||Yes|
|Staircases and ramps||Yes||Yes||Yes|
|Ceilings and fixed partition-walls||Yes||Yes||Yes|
|Parts of ducts, pipe-work, lines and shafts of all types inside walls, ceilings or floors, as well as those underground and used for connection to public infrastructures||Yes||Yes||Yes|
|Lifts and elevators in houses or apartments as well as fixed structures||Yes||Yes||No|
|Stiles and frames of interior doors||Yes||Yes||No|
|All types of covering for walls, floors and ceilings||Yes||2||No|
|Interior and exterior paint including painted paper||Yes||2||No|
Each invoice must separately relate to an amount exclusive of VAT exceeding one thousand two hundred and fifty Euros (€1 250).
Any person having undertaken or has caused to be undertaken the works listed above, without benefiting from the direct application of the rate of 3% can request VAT refund, provided that:
A list of invoices accompanied by the originals of the invoices as well as proofs of payment must be annexed.
According to the regulations applicable before the coming into effect of this law, the tax relief granted was in question when the dwelling for which it was granted was sold or used for purposes other than as the main residence within ten years as from the 1st of January of the year of completion of works for which is the relief is granted.
Pursuant to the new law, the tax relief is to be fully returned with interests at the legal rate as from the day of its grant if the dwelling is used for purposes other than as the main residence within two years as from the 1st of January of the year following the one during which the eligible works were completed.
In order to stimulate housing construction, the government subjects the creation and renovation of a dwelling to the super-reduced rate of 3%, provided that it is used as the main residence, either directly by the owner or indirectly by the tenant.
Dwelling means any building or part of buildings representing a distinct unit (e.g. an apartment) likely to be used as the main residence, including the garage, cellar or interior common areas related to it.
The simultaneous use of a dwelling as the main residence and for other purposes gives right to the tax relief, provided that the area reserved for the main residence is more than three quarters of the total area. If this area is less than or equal to the said proportion, the tax relief is granted in proportion with the part reserved for the main residence.
May be authorised for creation and renovation works carried out by categories of tradesmen within the limits and conditions set out in the Grand-ducal regulations of 30 July 2002 concerning the application of Value Added Tax on the use of a dwelling as the main residence and on creation and renovation works carried out in the interest of dwellings used as the main residence and setting out the related terms and conditions.
The request, which should be in the format recommended by the department, is signed by the taxpayer and countersigned by his client. In practice, the company may send the said request with its quote to the client who approves, completes and signs it.
In the absence of prior authorisation, the company is required to invoice at the rate generally applicable in this respect and the owner must follow the refund procedure in order to benefit, if applicable, from VAT refund up to the super-reduced rate of 3%.
The tax relief arising from the direct application of the super-reduced rate of 3% respectively of the refund up to the rate of 3% cannot exceed €50 000 per dwelling created or/and renovated.
If the beneficiary or his right-holders sell the dwelling or change the intended use thereof within 10 years, they must reimburse all or part of the tax relief.
However, in the event of a sale, this reimbursement is not required if the buyer continues to use the dwelling as the main residence and provided he declares that he continues the personality of the transferor whose rights and obligations in respect of VAT he assumes.
Any transfer for consideration or any use other than as the main residence is to be declared in writing to the department within one month, failing which a penalty may be imposed.
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