Under the tax laws currently in force, the taxation of the capital gains realised by individuals upon the disposal of the real estate part of their private wealth may, under certain circumstances, be deferred.
The taxation of the capital gain realised during a given year is deferred if the taxpayer uses the proceeds from the disposal of the real estate to acquire certain immovable property. The newly acquired real estate which would allow a tax deferral are, for instance, newly built property which will be used exclusively for rental to individuals (as opposed to a business lease). In addition the deferral is applicable only with respect to newly acquired immovable property located in the Grand-Duchy of Luxembourg.
In the framework of an infringement proceeding, the European Commission considered that the provision requiring that the newly acquired immovable property shall be located in the Grand-Duchy of Luxembourg is a restriction to the free movement of persons and capital.
The control by the Luxembourg tax authorities of the effective use of the real estate would generate practical difficulties for real estate located outside Luxembourg.
A Grand-Ducal decree of June 18th 2014 has thus abolished the provisions allowing the tax deferral.
This measure will be effective as from the January 1st 2015.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
