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Luxembourg – Capital Gains Tax Rule Change; Single Notification to Joint Taxpayers

Luxembourg – Capital Gains Tax Rule Change; Single

In this GMS Flash Alert we report on a new law easing the taxation of capital gains arising on the sale of second homes or investment property. We also highlight the Luxembourg tax authority’s decision to issue a joint notification in the case of joint taxation of spouses or registered partners.


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Flash Alert 2016-077

In this GMS Flash Alert we report on a new law easing the taxation of capital gains arising on the sale of second homes or investment property.  We also highlight the Luxembourg tax authority’s decision to issue a joint notification in the case of joint taxation of spouses or registered partners (instead of two separate notifications to each partner or spouse).


The developments reported on in this newsletter could impact globally mobile employees subject to Luxembourg tax law.  For those with second homes or investment property in Luxembourg, the changed capital gains taxation rules could impact their decision to sell or hold their real estate holdings that are subject to the new rules.  Selling qualifying property under the new rules could mean a lighter burden of capital gains taxation.

The joint notification of spouses or partners who are jointly taxed may mean that greater attention must be paid by the taxpayers concerned to notifications being issued to them by the tax authorities, as going forward they will receive only one notification per couple, rather than two separate ones.  This measure aims to simplify tax administration and ease the burden of administrative red tape. 

New Law (Bill 6983) Changes Capital Gains Taxation for Second Homes

As announced by the Luxembourg government earlier this year (see our previous GMS Flash Alert 2016-058 (6 May 2016) and Luxembourg “Tax Alert” 2016-11 (9 May 2016)), the reduction of the tax rate on gains realized from the disposal of certain real estate owned by private individuals is in force as of 1 July 2016.1

Under the previous tax rules, capital gains arising from the sale of real estate which serves as a secondary home or investment land / property (i.e., not the taxpayer’s main residence) and held by the taxpayer for more than two years were taxed at one-half (1/2) of the taxpayer’s global tax rate as “extraordinary income.”  

For a limited time from 1 July 2016 to 31 December 2017 (inclusive), the taxation of such gains realized during this period will be reduced to one-quarter (1/4) of the taxpayer’s global tax rate.

There will continue to be a tax-free allowance of EUR 50,000 (increased to EUR 100,000 for couples filing jointly), available over an 11-year period, to reduce the taxable gain (this may result in a loss).  In addition, the allowance will be EUR 75,000 for properties owned through direct inheritance (this may not result in a loss).


The Luxembourg government is anticipating that this measure will increase the amount of real estate property that is sold on the market so as to encourage the supply of land and homes in Luxembourg. 

New Law (Bill 6964) on Joint Notification Where Taxpayers Are Jointly Taxed

A new law2 has been enacted that allows the Luxembourg tax authorities to issue only one notification in case of joint taxation of spouses and registered partners, whereas previously two separate notifications were issued for each spouse/partner.  Therefore, from a legal point of view, the joint notification to the recipients of a decision (e.g., issuance of a tax assessment), constitutes a notification in respect of both spouses or registered partners concerned.  Individual notification of a joint decision may still be possible; however, it should be expressly requested by one of the spouses or registered partners filing jointly.


The aim of this new measure is to reduce the administrative costs of the Luxembourg tax authorities, as well as to reduce the formalities in terms of liability notification, especially for the issuance of tax assessments.  It is strongly recommended that taxpayers (especially those who are not living together due to legal separation, ongoing divorce process, etc.) check with the relevant tax office that they have the correct/full details regarding the domicile/address of the concerned individual(s) in their file.


1  See 99ter - 131§1d LIR.  

2  See §91, al.1 AO.  

For additional information or assistance, please contact your local GMS professional or one of the following professionals with the KPMG International member firm in Luxembourg.


Frédéric Scholtus

Associate Partner 

Tel. +352 22 51 51 5333


Marisa Hosnar

Senior Manager

Tel. +352 22 51 51 5425


André Kayser


Tel. +352 22 51 51 5562

The information contained in this newsletter was submitted by the KPMG International member firm in Luxembourg.

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Flash Alert is an Global Mobility Services publication of KPMG LLPs Washington National Tax practice. The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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