Luxembourg Tax Alert 2022-02

On 20th January 2022, the Luxembourg tax authorities issued an administrative circular “PRE_IMM n° 1” (PDF, 0.3MB) (the Circular”) on the Real Estate Levy (“REL”) for selected investment Fund vehicles holding Luxembourg real estate, clarifying the related filing obligations.

While the REL only applies to revenues derived from Luxembourg based real estate, the Circular reminds that all “non-transparent” Luxembourg investment fund vehicles having a legal personality distinct from their shareholders and that are not incorporated under the legal form of a Luxembourg limited partnership (SCS) are obliged to file specific notification prior to 31st May 2022, even if not owning Luxembourg real estate.

The REL was introduced in the Budget 2021 and is applicable as from 1st January 2021.

In this respect, the following opaque Luxembourg investment fund vehicles with a legal personality distinct from their shareholders (except those incorporated as a SCS), are subject to a 20% REL:

• Collective Investment Funds (OPCs) that fall under Part II of the amended law of 17th December 2010 concerning undertakings for collective investment;
• Specialized Investment Funds (SIFs) referred to in the amended law of 13th February 2007; and
• Reserved Alternative Investment Funds (RAIFs) referred to in article 1 of the amended law of 23rd July 2016.

Accordingly, the REL applies to any real estate investment located in Luxembourg owned by one of the abovementioned vehicles, either directly or indirectly through tax transparent entities or FCPs. 

The REL is due when the following cumulative conditions are met:

• all income has been sourced from real estate located in Luxembourg; and
• the income has been received or realized directly from the real estate asset or indirectly through any other interposed tax transparent entity, such as a Luxembourg SCS, a special limited partnership (SCSp), Luxembourg civil partnership in real estate (SCI), Luxembourg partnership (SNC) or a contractual fund (FCP).

The total amount subject to the REL and the amount of tax must be declared via MyGuichet, at the latest by the 31st May of the year following the calendar year in which the qualifying income derives from, meaning 31^st May 2022 for real estate income earned in the calendar year 2021. The declaration will have to be made in a specific form available on MyGuichet and the REL will have to be paid by 10th June 2022.

For the sake of completeness, note that a breakdown per item of real estate and the amount of levy due must be provided (information evidencing those amounts could be requested by the Luxembourg tax authorities). In addition, a certificate of an auditor “Réviseur d’entreprise agréé” must be attached.

The REL is not deductible for determining the taxable real estate income. Furthermore, the REL cannot be deducted or credited by a corporate or individual investor.

Yes, there are additional filing obligations due for qualifying investment fund vehicles.

By 31st May 2022 at the latest, qualifying investment fund vehicles must report whether or not, during any moment in 2020 or 2021, they owned real estate in Luxembourg or a participation in a vehicle owning real estate located in Luxembourg.

The reporting obligation will also apply in case a change of the legal form took place, i.e., where an opaque qualifying investment fund vehicle converted into a tax transparent investment fund vehicle during calendar year 2020 or 2021, while holding Luxembourg real estate at the time of conversion.

For those who hold Luxembourg real estate and are subject to the REL, the declaration is deemed to be in compliance with the reporting obligation.

The Circular provides further information on the applicable penalties for default or late filling of up to EUR 10,000.

We would highly recommend reaching out to your KPMG team, which can assist you in preparing and filing those reports.

1. All opaque Luxembourg investment fund vehicles not holding Luxembourg real estate must notify before 31st May 2022, that they were not holding Luxembourg real estate during 2020 and 2021.
2. Those who hold Luxembourg real estate must:
   • File a declaration declaring their qualifying income; and
   • Notify in case of a change of the legal form (retroactively as from 2020).