Investing in rental property in Luxembourg: buying a new one or an old one?
October 13, 2017
Your project is simple: invest in a property in the Grand Duchy and then make a rental. It’s only that you do not know which type of accommodation to turn to.
Here are some tips that can help you with regard to the tax impact that it will have depending on the type of property.
If you choose to buy a property to renovate or to construct a brand new property, your tax rate will not be the same later on when declaring your rental income.
To prepare your residential rental project, you must take into account the various fees and taxes to be paid.
In terms of acquisition costs, they are more beneficial for the buyer on an already existing property, which means an old one, than on a property under construction.
In fact, even if the registration fees are higher for an existing dwelling, the due VAT amount is much lower on a dwelling which requires work, for example, than on a new dwelling.
As a result, the total acquisition costs will be higher on a new property for a same surface area located in the same geographic location.
The second key step will be declaring the rental income that you have obtained.
You will of course have to declare your income received by renting your real estate property in the same way as your salary and any other investment incomes received.
They are taxed at the overall tax rate but can be subject to several deductions called procurement costs.
At this point, buying a recent property (buildings that are less than 6 years old) will be more beneficial, since you will be able to deduct the loan interest from your rental income (without ceiling limits) and the depreciation of the construction will be fixed at 6% of the acquisition value for buildings less than 6 years old (excluding land)
It is also advisable to get a loan even if you have the necessary cash amount to purchase the property because this mortgage loan gives a significant advantage on the deductions to be made on the rental income.
The last step is reselling your real estate property.
Know that you will get a more beneficial capital gain if you sell your property after at least 2 years of ownership, which is called "capital gain on disposal". At that time, the purchase value of the property will be reassessed.
Otherwise, if your property is sold less than 2 years after its purchase, you will not benefit from any abatement or revaluation; your capital gain will be referred to as "speculative" and taxed at your overall tax rate.
If you wish to sell your property before the end of 2017, please note whether the sale takes place between 01/07/2016 and 31/12/2017, so that the tax rate will be a quarter of your tax rate.
Do you want to invest in real estate to be able to make a rental? Explore all the new and old properties available among our 250000 ads listed on our IMMOTOP.LU portal.
Other recent articles:
Why you should go through a notary for your real estate transaction!
Get your mortgage loan in a secure manner!
All the best tips for before you buy your apartment!
Luxembourg with AAA score despite growing real estate prices
Here are some tips that can help you with regard to the tax impact that it will have depending on the type of property.
If you choose to buy a property to renovate or to construct a brand new property, your tax rate will not be the same later on when declaring your rental income.
To prepare your residential rental project, you must take into account the various fees and taxes to be paid.
In terms of acquisition costs, they are more beneficial for the buyer on an already existing property, which means an old one, than on a property under construction.
In fact, even if the registration fees are higher for an existing dwelling, the due VAT amount is much lower on a dwelling which requires work, for example, than on a new dwelling.
As a result, the total acquisition costs will be higher on a new property for a same surface area located in the same geographic location.
The second key step will be declaring the rental income that you have obtained.
You will of course have to declare your income received by renting your real estate property in the same way as your salary and any other investment incomes received.
They are taxed at the overall tax rate but can be subject to several deductions called procurement costs.
At this point, buying a recent property (buildings that are less than 6 years old) will be more beneficial, since you will be able to deduct the loan interest from your rental income (without ceiling limits) and the depreciation of the construction will be fixed at 6% of the acquisition value for buildings less than 6 years old (excluding land)
It is also advisable to get a loan even if you have the necessary cash amount to purchase the property because this mortgage loan gives a significant advantage on the deductions to be made on the rental income.
The last step is reselling your real estate property.
Know that you will get a more beneficial capital gain if you sell your property after at least 2 years of ownership, which is called "capital gain on disposal". At that time, the purchase value of the property will be reassessed.
Otherwise, if your property is sold less than 2 years after its purchase, you will not benefit from any abatement or revaluation; your capital gain will be referred to as "speculative" and taxed at your overall tax rate.
If you wish to sell your property before the end of 2017, please note whether the sale takes place between 01/07/2016 and 31/12/2017, so that the tax rate will be a quarter of your tax rate.
Do you want to invest in real estate to be able to make a rental? Explore all the new and old properties available among our 250000 ads listed on our IMMOTOP.LU portal.
Other recent articles:
Why you should go through a notary for your real estate transaction!
Get your mortgage loan in a secure manner!
All the best tips for before you buy your apartment!
Luxembourg with AAA score despite growing real estate prices