Tax credit on notarial instruments.

Any resident of Luxembourg can benefit from tax credit on registration and transcription fees. What does this actually mean? In short whenever a property, but not any property, is sold from one landlord to another, the next landlord has the possibilities to reduce their registration and transcription fees by 20.000.

Let’s go through a simple scenario in which an apartment is sold for 1.000.000 to a couple. Registration and transcription fees being 7% of the sales price, accumulate to 70.000. The couple, having never applied their right for the tax credit before, chose to both apply their tax credit of 20.000 per person, accumulating to 40.000. Their registration and transcription fees have now been reduced from 70.000 to 30.000.

The tax credit is a right but not an obligation. Therefore, this particular couple could choose to apply only part of their tax credit. Person 1 uses up 10.000 and person two uses up 15.000, reducing their fees by 25.000. Person 1 still has the possibility to apply 10.000 on another future purchase while Person 2 has 5.000 left for future purchases.

Conditions do however apply. This instrument was put into place by the government to give first-time home buyers the ability to get in to the market and become landlords, not to help investors purchase more properties. Therefore, if one applies the tax credit, they aren’t allowed to sell, rent out or vacate within the next 2 years of purchase (4 years in the event of the acquisition of a building plot or a building under construction).

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