Fixed asset disposal in Luxembourg: the gain

How is the gain on a fixed asset disposal in Luxembourg calculated?

The gain on a fixed asset disposal in Luxembourg equals the sale price less the asset's net book value at the date of sale, that is the acquisition cost or production cost less accumulated depreciation and any value adjustments still recorded. A price below that net value produces a loss on disposal in the same way.

The computation assumes two simultaneous removals, and that is where the entry most often goes wrong. The asset leaves the balance sheet at its gross value, the accumulated depreciation recorded against it leaves at the same time, and only the difference between the price received and the resulting net amount is a result. We regularly see the opposite when taking over a file: an asset removed at its sale price, or removed net without releasing the accumulated depreciation, which leaves a depreciation balance with no matching asset and distorts the fixed asset movement table in the notes.

The disposal result is therefore always a net amount, never the sale price. The distinction is not cosmetic: it changes reported turnover, the reading of margin ratios and, for a company close to a threshold, the company size used for accounting obligations. A sale price booked as operating income inflates total income while leaving the result unchanged.

The price to use is the agreed one, net of the seller's costs directly attributable to the transaction. For a disposal between related parties, the price must be the one independent undertakings would have agreed: a transfer at book value, convenient to record, is precisely the one the tax authorities look at first where the asset's market value is higher.

Where does the disposal result appear in the annual accounts?

The result of a fixed asset disposal in Luxembourg appears under other operating income when it is positive and under other operating charges when it is negative: the profit and loss account layout has no line dedicated to gains and losses on disposal.

The Commission des normes comptables says so explicitly in its question and answer 16/010: absent a specific line, gains are classified under heading 4, other operating income, and losses under heading 8, other operating charges. That numbering is the one in the profit and loss account layout set by the Grand-Ducal regulation of 18 December 2015, adopted in execution of articles 34, 35, 46 and 47 of the law of 19 December 2002 on the trade and companies register and on the accounting and annual accounts of undertakings, which replaced the list of items previously contained in the law itself.

Two practical consequences follow for anyone reading the annual accounts. First, the sign: in that layout income items appear as positive values and charge items as negative values, so a gain and a loss do not net off on one line but sit in two separate headings. Second, traceability: nothing in the profit and loss account tells the reader that an item of operating income comes from a disposal rather than from ordinary activity, which makes the notes and the fixed asset movement table indispensable to any analysis.

The standard chart of accounts then breaks those headings down into narrower accounts. The chart applicable to financial years beginning on or after 1 January 2020, set by the Grand-Ducal regulation of 12 September 2019, has seven classes, distinguishes grouping accounts from posting accounts, and allows transactions to be recorded only in the latter. Which posting account a disposal belongs to depends on the chart in force for the financial year concerned and is checked in its annex rather than from memory.

Which depreciation charge applies up to the disposal date?

An asset sold leaves the net invested assets of a Luxembourg undertaking at its tax value, that is the acquisition or production cost less the depreciation allowed: accumulated depreciation can never exceed that cost, reduced where applicable by the asset's estimated residual recovery value.

The direct tax authorities set two further limits in their page on the valuation of assets forming part of the net invested assets. A going-concern value below the acquisition cost less necessary depreciation may be used, which matters where a lasting impairment preceded the sale. And an item that has already formed part of the net invested assets may not be valued above the value shown in the previous balance sheet: the exit value is therefore built from the asset's own history, not from the price the buyer agrees to pay.

Three upstream rules mechanically determine the net value on the day of the sale. Depreciation runs in principle from the acquisition or the commissioning of the asset, with one accepted simplification: a full annual charge where the asset is acquired in the first half of the year, half a charge where it is acquired in the second half. Land is not depreciable because it does not lose value, quarries excepted, so selling a building assumes the land was separated out at acquisition. And an investment grant received reduces the depreciation base and, as a knock-on effect, increases the gain recognised on disposal.

The useful lives applied therefore drive the amount of that gain as much as the sale price does. The same logic governs items capitalised as a management choice, such as formation expenses carried as an asset rather than charged: the net value that will one day leave the accounts is determined by the depreciation pattern chosen at the outset.

One point we do not settle here: the charge for the year of disposal. The official sources we could read set out when depreciation starts and the cap on the accumulated amount, but none of them states the fraction of the annual charge allowed for the year of the sale. In practice that fraction is documented in the working file together with the calculation used, rather than carried over from one year to the next: a difference in the charge for the year of exit shifts the disposal result euro for euro.

Can the gain be rolled over onto a replacement asset?

Yes: article 54 of the income tax law allows a gain realised on a building, or on a non-depreciable asset forming part of the net invested assets, to be rolled over onto assets acquired or built by reinvesting the sale price, which defers the tax rather than cancelling it.

The conditions read in the coordinated texts are cumulative. The asset sold counts as a fixed asset only if it formed part of the net invested assets during the five years preceding the sale. The replacement assets must belong to the net invested assets of a permanent establishment located in the Grand Duchy. The undertaking must have kept regular accounting records throughout the financial year of realisation. And where only part of the sale price is reinvested, the gain may be rolled over only in proportion to the reinvested share.

The mechanism deserves to be understood for what it is, a deferral and not an exemption. The transferred gain is deducted from the acquisition cost of the replacement asset, which is then depreciated on a reduced base and will produce a larger gain on its own disposal. Guichet.lu gives the worked example: a gain of 1,000 reinvested in a building of 5,000 depreciated at 4% brings the tax cost down to 4,000 and the annual charge to 160 instead of 200. The cash benefit is immediate; the tax charge comes back spread over time.

Two points frame the timing. Reinvestment before the sale is in principle excluded, with an exception for a building needed for the continuation of the business: the operator must then move out of the old building into the new one as soon as it is completed, and the old building must be sold within twenty-four months of that completion. Paragraph 1 of article 54 was moreover rewritten by the law of 17 April 2018, which makes reading an older coordinated version risky. A decision of this kind is prepared with a tax adviser before the preliminary agreement is signed, not after.

What is the monetary gain exemption on a building?

The monetary gain exemption allows the purely monetary part of a gain realised on a building to be neutralised, on request, where a Luxembourg undertaking sells it or ceases its activity: the exempted amount is the excess of the revalued book value over the book value.

The mechanism is a conventional revaluation. The revalued book value is obtained by applying coefficients to the acquisition or production cost, to the depreciation and to the value adjustments, each coefficient matching the year in which the financial year concerned closed; circular L.I.R. no. 81 of 11 May 1981 states that the coefficient to use is the one for the year in which the building was acquired or built. Those coefficients are the ones in the table in article 102, paragraph 6 of the income tax law, the same table used for property gains realised by individuals.

Two caveats condition any use of the regime. First, the coefficient table in article 102, paragraph 6 has been replaced more than once, the tax authorities' newsletters of 21 December 2017 and of 27 December 2019 each reporting an amendment: a calculation must therefore start from the table in force for the tax year concerned, not from a grid copied out of an earlier file. Second, an exempted gain that ceases to be exempted must be booked in the result of the current financial year, a transfer onto a replacement asset remaining possible in one case.

In practice the exemption and the article 54 rollover answer two different questions and combine badly when improvised. The first neutralises the effect of inflation on a building held for a long time; the second defers tax on a gain actually realised. Both require a request and a quantified file; neither follows from an accounting entry alone.

What VAT applies to a fixed asset disposal?

A fixed asset disposal in Luxembourg follows the VAT treatment of the asset sold: the supply of immovable property is in principle exempt, with an option to bring it within the scope of the tax, and the VAT deducted on acquisition may have to be adjusted where the sale falls within the adjustment period.

The exemption is in article 44, paragraph 1, point f) of the VAT law, which covers supplies of immovable property and transfers of rights in rem over immovable property; it does not apply to supplies under a contract for the sale of buildings to be constructed, covering constructions not yet in existence when the contract is concluded. A taxable person selling a building to another taxable person may waive that exemption and bring the transaction within the scope of VAT.

The indirect tax portal and the Grand-Ducal regulation of 7 March 1980 set the limits: the purchaser must be a taxable person, the building must be used entirely, or as to its predominant part in case of mixed use, for activities giving rise to a right of deduction, and for a sale the approval must be obtained before the notarial deed is executed. That last condition is a deadline, not a formality: obtained after signature, it does not rescue the transaction.

Adjusting the initial deduction is the second reflex. The VAT law sets an adjustment period of five years for capital goods and of ten years for immovable capital goods, that period running from the start of use of the asset where it is not used from acquisition. Guichet.lu gives the formula: for built property, the VAT deducted on acquisition multiplied by one tenth per remaining year, and for other capitalised assets the VAT deducted multiplied by one fifth per year.

The Grand-Ducal regulation of 7 March 1980 adds, for buildings, that where use changes the adjustment is made globally for the time remaining until the ten-year period expires, at one tenth per calendar year or part of a year.

The link between the two points is direct, and it is the one that costs money when seen too late: selling a building under the exemption means carrying out a transaction without a right of deduction, which opens the question of adjusting the input tax deducted, whereas opting for taxation preserves that right. The calculation is run together with the taxable person's input VAT pro rata and before signature. The scope of that analysis and the corresponding fees are set out in our fee schedule.

Sources and verification

Written for Financial Services Luxembourg and reviewed before publication by Mickaël LOC, licensed accountant (authorisation 10077274). Every source cited below was read on 24 October 2026, the date that governs the state of the law presented in this article.

Accounting law: question and answer 16/010 of the Commission des normes comptables, for the classification of disposal gains under heading 4, other operating income, and of losses under heading 8, other operating charges, and for the sign of income and charge items in the 2016 layout; the Grand-Ducal regulation of 18 December 2015 setting the form and content of the balance sheet and profit and loss account layouts, adopted in execution of articles 34, 35, 46 and 47 of the law of 19 December 2002 on the trade and companies register and on the accounting and annual accounts of undertakings;

the standard chart of accounts set by the Grand-Ducal regulation of 12 September 2019, for its application to financial years beginning on or after 1 January 2020, for its seven classes and for recording transactions in posting accounts only. Direct tax: the A to Z pages on the valuation of assets forming part of the net invested assets of a commercial undertaking, on depreciable fixed assets and on the monetary gain exemption on a building, published by the Administration des contributions directes;

the coordinated texts of the amended law of 4 December 1967 on income tax published by that administration, for the cap on accumulated depreciation in article 29 and for the rollover conditions in article 54; circular L.I.R. no. 81 of 11 May 1981, for the coefficient of the year of acquisition; the administration's newsletters of 21 December 2017 and 27 December 2019, for the replacements of the coefficient table in article 102, paragraph 6; the law of 17 April 2018, for the rewriting of paragraph 1 of article 54;

the Guichet.lu pages on exceptional transactions in the computation of net income and on operating income, for the worked reinvestment example, for when depreciation starts and the half-year simplification, and for land not being depreciable.

VAT: the amended law of 12 February 1979 on value added tax in the coordinated texts published by the indirect tax portal, for the exemption in article 44, paragraph 1, point f), for the waiver in article 45 and for the five-year and ten-year adjustment periods; the Grand-Ducal regulation of 7 March 1980 in its version consolidated as at 1 January 2025 published by Legilux; the indirect tax portal page on the VAT option for letting or selling property and the Guichet.lu page on deducting input VAT.

Four points could not be verified and are therefore not asserted here. First, the Luxembourg official domains are blocked by the network proxy of our editorial environment: these pages were read through indexed extracts obtained from searches restricted to official domains, with no extrapolation. Second, the posting accounts of the 2020 standard chart of accounts carrying the disposal proceeds and the book value of the asset removed: no official extract we read identifies them, the comparison table of the Commission des normes comptables could not be opened, and no account number is therefore cited.

Third, the period within which the article 54 reinvestment must take place after the sale, which no extract we read states, and whether the regime extends to securities: only the twenty-four month period specific to the anticipated reinvestment of a building is confirmed. Fourth, the fraction of the annual depreciation charge allowed for the year of the disposal, and the revaluation coefficients currently in force. Readers can check these four points on legilux.public.lu, on impotsdirects.public.lu, on cnc.lu and on guichet.public.lu.

This article sets out the state of the law at the date of publication and is not personalised advice: the treatment of a disposal depends on the nature of the asset, how long it was held, the undertaking's VAT position and the reinvestment contemplated, and is settled with your licensed accountant. Report an error to contact@financialservices.lu: the correction is dated in the article.