Luxembourg – Budget Bill Advances, Other Bill Proposes Unoccupied Housing Tax

Background

On 12 October 2022, Yuriko Backes, the Luxembourg Finance Minister, presented the 2023 budget (Bill 8081). A number of tax measures that were proposed are embodied in the 2023 draft Budget Law, which was passed by Parliament last week.

Bill 8082, the property tax reform bill, introduced in Parliament in early October, is currently with the Commission des Affaires intérieures et de l'Egalité entre les femmes et les hommes.

Bill 8081

Extension of Deadline for Filing Tax Returns

On 12 October 2022, Yuriko Backes, the Luxembourg Finance Minister, presented the 2023 budget (Bill 8081). A number of tax measures that were proposed are embodied in the 2023 draft Budget Law, which was passed by Parliament last week.

Bill 8082, the property tax reform bill, introduced in Parliament in early October, is currently with the Commission des Affaires intérieures et de l'Egalité entre les femmes et les hommes.

Maintenance or Increase of Tax Credits

The tax credit on the minimum base salary – “Crédit d’impôt sur le salaire social minimum” (CISSM) – will remain unchanged.

The single-parent tax credit – “Crédit d’impôt monoparental” (CIM) – will be enhanced by increasing:

• the tax credit from EUR 1,500 to EUR 2,505.
• the maximum taxable income allowed to benefit from the maximum amount of tax credit, from EUR 35,000 to EUR 60,000.

Attraction of Key Talent to Luxembourg

The bill contains a measure that would lower the impatriate tax regime eligibility condition from an annual fixed minimum salary of EUR 100,000 to EUR 75,000.

Opening the participative premium in a group context: the 5 percent of the total positive result can – this is optional – be determined based on the global commercial profits of an integrated group (as defined under Article 164bis of the Luxembourg Income Tax Law (“LITL”)).

Other Changes

Restriction of the accelerated depreciation regime on rental real property, as introduced by Budget Law 2021:

• Lowering the rate from 6 percent to 4 percent.
• Only up to two properties.
• Only for buildings acquired or built after 31 December 2022.

These measures would enter into effect as from 1 January 2023.

Bill 8082’s New Tax on Unoccupied Housing ("Impôt national sur la non-occupation de logements / INOL")

We highlight this measure in Bill 8082, as it may concern a number of international assignees who own property in Luxembourg and who, due to their assignment, have left the house in Luxembourg unoccupied.

A house would be considered “unoccupied” when no individual has been registered there for the past six months, or, for example, if there is no energy consumption linked to it. This presumption is rebuttable, meaning that the taxpayer can justify the occupation or the non-occupation based on legitimate reasons. A national registry of unoccupied housing will also be implemented for this purpose.

This tax would be levied yearly at the national level (as opposed to municipality level), for an amount that would start at €3,000 and would incrementally increase by €900 per year of non-occupation, to reach a maximum annual amount of €7,500.

The INOL is not deductible for tax purposes.

The current Luxembourg property tax regime was established more than 80 years ago. The abolishment of the old unitary values of 1941 as per the new bill will also require adjustments in some tax provisions of the Luxembourg income tax law, including, among other, the determination of the acquisition price of real estate properties acquired prior to 1 January 1941, for the purpose of the computation of the capital gain realised on the disposal of such properties.

Contacts