Property capital gains in Luxembourg: the 5-year test

How are property capital gains in Luxembourg taxed?

Property capital gains in Luxembourg follow two regimes depending on the holding period: sold five years or less after it was acquired, a privately held property produces a speculation profit taxed at the ordinary tariff, up to 42 %; sold more than five years after, it produces a disposal gain taxed at half the global rate, capped at 21 %. The principal residence stays exempt.

Both regimes sit in the same income category, miscellaneous net income, but on two separate articles of the amended law of 4 December 1967 on income tax: article 99bis for the speculation profit, article 99ter for the disposal gain. The two rates quoted are stated before the employment fund contribution, which is added to the tax and not to the rate.

The phrase global rate does not mean a flat rate: it denotes the rate that results from applying the ordinary tariff to total taxable income. Half the global rate is half of that, hence a 21 % ceiling only a taxpayer already taxed in the top bracket actually reaches.

Two dates govern the computation. The date of the sale for consideration is the date of the notarial deed, not that of the preliminary agreement nor of payment. And for counting the holding period, the land and the building are assessed as two separate assets, which can place a house and its plot in two different regimes.

This is not the same file as the removal of a property carried on the balance sheet of a company or a sole trader, which follows other rules, described in our article on the disposal of a fixed asset and its gain. Here the property belongs to an individual's private estate.

Why did the speculation period move from two years to five?

The speculation period of article 99bis was extended in Luxembourg from two years to five by the housing package, and the longer period applies from the 2025 tax year. It is the change that moves the most files, because it shifts the border between a rate capped at 21 % and a tariff that climbs to 42 %.

The parliamentary committee report on the bill carrying the measure describes it in these terms: the adaptation of the speculation period provided for in article 99bis, from a period of two years to a period of five years, with the stated aim of limiting property speculation. Form 700 F for the year 2025 carries the new threshold in its own wording, which covers an interval between acquisition or construction and realisation not exceeding five years, for built and unbuilt property alike.

The consequence is arithmetical and it still catches sellers out. A flat acquired in March 2023 and sold in November 2026 has been held for less than five years: the gain falls under the speculation profit and is added to taxable income at the ordinary tariff. Under the former two-year period, the same transaction produced a disposal gain, with half the global rate, a revalued acquisition price and the ten-year allowance. The same property, the same duration, two very different tax bills.

Documentary care follows from this. Tax handbooks published before 2025 remain available online and still state the two-year period. We regularly see sale calendars built on that expired duration, sometimes a few months short of a date that would have moved the transaction into the favourable regime.

When is the sale of a principal residence exempt?

The sale of a principal residence is exempt from income tax in Luxembourg under article 102bis, whatever the holding period of the property, but the exemption is earned on questions of fact, and it is lost on the timing of the move far more often than on the price.

First situation: the dwelling is occupied at the time of the sale, or the sale takes place no later than 31 December of the year following the year of the move. One of the following three conditions is then enough: having occupied the dwelling following its acquisition or completion, having occupied it during the five years preceding the sale, or selling for family reasons or a change of residence connected with the occupation of the taxpayer, their spouse or their partner.

Second situation, a more demanding one: the dwelling is unoccupied at the time of the sale, or the sale takes place after 31 December of the year following the move. The three conditions then become cumulative: having occupied the dwelling following its acquisition or completion, not owning another dwelling, and having left the dwelling for family or occupational reasons. A property left empty for two years after a departure, without one of those three conditions, falls outside the exemption.

Four points of scope prevent unpleasant surprises. The exemption covers the normal outbuildings of the building and the land on which it stands, but the separate disposal of part of the land does not benefit from it, since the principal residence is not thereby realised. In joint ownership it only covers the taxpayer's own share. The right to the exemption is personal. And, the point most often forgotten: even where it is exempt, the sale must be declared.

How is the disposal gain on a property computed?

A disposal gain on a property is computed in Luxembourg as the difference between the realisation price and the revalued acquisition price, that revaluation being carried out by multiplying with the coefficient for the year in which the expenditure was incurred, under the table reproduced on page 3 of form 700 and provided for by article 102, paragraph 6.

The revaluation neutralises inflation, and it is the reason a long-held property produces a taxable gain far below its nominal increase in value. Where the acquisition price is made up of expenditure spread over several years, a land purchase followed by construction works for instance, each tranche is revalued with the coefficient of its own year.

The treatment of assets received for no consideration is the least understood part of this computation. A property received by inheritance or gift is deemed to have been acquired at the time of the last deed of sale for consideration. In other words, the heir does not start from the value entered in the inheritance declaration: they take back the price paid on the last sale, often several decades earlier, and then revalue it. A family house bought in the nineteen-sixties and sold today therefore produces a substantial gain even in the hands of an heir who never paid anything for it.

The same reasoning on dates governs the five-year period: for an inherited asset it is the date of the last deed for consideration that counts, not the date of death, which places almost all such disposals in the disposal-gain regime. The split between land and building is set out in circular L.I.R. no. 99ter/1 of 29 December 1994, an old text expressed in Luxembourg francs whose principle alone is used here.

Which allowances reduce a property capital gain?

Two allowances reduce a disposal gain in Luxembourg: the ten-year allowance of EUR 50,000 under article 130, paragraph 4, raised to EUR 100,000 for spouses or partners taxed jointly, and an allowance of EUR 75,000 under article 130, paragraph 5, reserved for a property acquired by inheritance in the direct line which served as the principal residence of the seller's parents.

The ten-year allowance earns its name: it is reduced by the allowances granted over the ten preceding years. An owner who used the whole of theirs on a 2021 sale will not have full use of it again before 2031. Nor can it create a loss.

The EUR 75,000 allowance answers a precise and, in Luxembourg estates, frequent situation: the parents' house taken over by a child and then sold. Two conditions appear in it: acquisition by inheritance in the direct line, and use of the property as the principal residence of the seller's parents. It is a matter to frame before the deed, like the choices covered on our succession planning page, because the order of steps in an estate decides which allowance remains available.

Three thresholds or exemptions complete the picture. Speculation profits are not taxable where the total profit for the calendar year stays below EUR 500, and above that threshold the whole profit is taxable, not merely the excess. Speculation profits and disposal gains are furthermore exempt where the property is transferred to the State, to a municipality, to a municipal syndicate or to the Fonds du Logement. Finally, speculation losses can only be offset against other miscellaneous net income, not against a salary.

Is the quarter-of-the-global-rate still available?

The reduced rate at a quarter of the global rate, that is 10.5 % at most, is no longer available in Luxembourg: it covered income realised from 1 January 2024 to 30 June 2025, after a first window open from 1 July 2016 to 31 December 2018. Outside those periods, a disposal gain is taxed at half the global rate, capped at 21 %.

That measure was the most visible tax component of the housing package. The review published by the Ministry of Housing in September 2025 records the end, at the close of June 2025, of the reduced taxation of disposal gains at a quarter of the global rate.

In the official sources consulted for this article we found no reintroduction of the quarter rate for 2026. A seller still reading that rate in an online comparison is therefore reading an outdated document, and a disposal plan built on 10.5 % recalculates at 21 %, a doubling of the charge on the taxable portion.

The reference period calls for a reservation we prefer to state. The Administration des contributions directes page puts the end of the window at 30 June 2025, while one line of form 700 F for the year 2025 refers to a gain realised between 1 January and 30 September 2025. A file whose sale falls in the summer of 2025 should therefore be checked with the competent tax office before any figures are produced.

Rolling over the gain: the 2026 tax year deadline

The rollover of a gain onto a replacement property falls due this year for a whole generation of files: for gains realised from 1 January to 31 December 2024, the reinvestment must be made no later than during the 2026 tax year, and the deadline moves to 2027 for disposals in the first half of 2025.

The rollover conditions of article 102quater are narrow, and that is what makes the deadline tight. The replacement property must be located in the Grand Duchy of Luxembourg, be newly built, and either be allocated to the social rental management scheme provided for in article 49 of the law of 7 August 2023 on affordable housing, or reach level A+ in the energy performance classes.

The share of the gain rolled over onto the land is capped at 50 % of the amount transferred, and an amount at least equal to the gain transferred must have been reinvested in equity no later than the end of the tax year following the disposal.

Two recapture mechanisms are worth knowing before committing. The portion of the gain for which no rollover is claimed remains taxable for the year of the disposal. And the gain rolled over becomes taxable again in the year in which the replacement property is contributed to a commercial, industrial, mining or craft business, ceases to meet one of the conditions of the regime, or becomes the taxpayer's principal residence. On a reasoned request, the tax office may extend the deadline by two further years where the property is still under construction.

The filing mechanics are simple but formal, and they cannot be made good afterwards. The sale is declared on form 700, attached to the individual income tax return, form 100, with as many 700 forms as there were properties sold or exchanged. The rollover, for its part, is claimed expressly from the competent tax office using annex 700, when the return for the year of the disposal is filed. A rollover not claimed in that return is not a formal oversight: it is a taxable gain.

What we regularly see comes down to two observations. The first is that an exempt sale is almost never declared: the seller of a principal residence treats the matter as closed at signature whereas form 700 is still due, and the position is then regularised under pressure from a letter from the tax office. The second is that the acquisition price of an inherited asset is rarely documented: tracing the last deed for consideration, sometimes from the nineteen-forties, takes several weeks with the notary or the registration authority, and that delay is prepared before the property goes on the market.

A property capital gain filing remains with us a one-off engagement in the order of a few hundred euros, the framework for which is published on our pricing page: the costly work is reconstructing the acquisition price, not the form itself. The framing is done with the licensed accountant who prepares the return, in line with our personal tax return page.

Sources and verification

Written for Financial Services Luxembourg and reviewed before publication by Mickaël LOC, licensed accountant (authorisation 10077274). The sources were verified on 13 November 2026, the publication date of this article.

The sources consulted are as follows.

For the architecture of the two regimes, articles 99bis and 99ter of the amended law of 4 December 1967 on income tax, in the wording used by the Administration des contributions directes page on the sale of built or unbuilt property, which places the sale in the speculation profit where the interval between acquisition or construction and sale does not exceed five years, gives the ordinary tariff up to 42 % before the employment fund contribution, and states the EUR 500 non-taxation threshold for speculation profits per calendar year as well as the exemption for transfers to the State, to municipalities, to municipal syndicates and to the Fonds du Logement.

For half the global rate and its 21 % ceiling, the same administration's pages on half the global rate and on miscellaneous net income, and the Guichet.lu page on declaring the sale or exchange of a property, which also gives the ten-year allowance of EUR 50,000, raised to EUR 100,000 under joint taxation, and its reduction by the allowances granted over the ten preceding years under article 130, paragraph 4.

For the EUR 75,000 allowance reserved for property acquired by inheritance in the direct line and used as the principal residence of the seller's parents, article 130, paragraph 5 and form 700 F for the year 2025. For the extension of the speculation period, the parliamentary committee report on the housing package bill, which describes the adaptation of the article 99bis period from a period of two years to a period of five years applicable from the 2025 tax year, and the wording of form 700 F for the year 2025.

For the principal residence exemption, article 102bis, the Administration des contributions directes page on the sale of a principal residence and its interactive principal residence assistant, together with circulars L.I.R. no. 99ter/1 of 29 December 1994 and no. 99ter/1bis of 7 March 2016 for the split between land and building and for the separate disposal of part of the land. For the revaluation of the acquisition price, article 102, paragraph 6 and the table of coefficients reproduced on page 3 of form 700.

For the rollover of the gain, article 102quater, the Administration des contributions directes page on the rollover of a gain on a property forming part of the taxpayer's private estate, the annex 700 form and article 49 of the law of 7 August 2023 on affordable housing. For the end of the quarter rate, the same A to Z page and the Ministry of Housing publication Le Logement en chiffres no. 18 of September 2025.

Five points could not be verified in this run, and we flag them rather than present them as established. First, the values in the table of revaluation coefficients applicable to the 2026 tax year: we give the mechanism and the source, not the figures, which are read on page 3 of form 700 for the year concerned on the Administration des contributions directes website.

Second, whether the ten-year allowance of article 130, paragraph 4 applies to a speculation profit: the sources consulted attach it to the disposal gain without expressly settling the speculation case, and the table in this article therefore gives it no line. Third, the end date of the derogatory window, which the Administration des contributions directes page sets at 30 June 2025 and which one line of form 700 F for the year 2025 refers to as 30 September 2025: a sale in the summer of 2025 should be checked with the competent tax office.

Fourth, the tariff applicable to the 2026 tax year: the top 42 % bracket we quote was read on an administration page presented as applicable from the 2025 tax year, and we could not read the 2026 tariff itself, nor the rate of the employment fund contribution in force for that year. Fifth, the exact reference of the law carrying the extension of the speculation period: we take it from a parliamentary committee report and from the administration's form, not from the text published in the official journal.

Direct access to impotsdirects.public.lu, guichet.public.lu and legilux.public.lu was blocked by the network in this run: the references above come from searches restricted to those official domains and not from reading the documents in full, which human review must check before publication.

This article sets out the state of the law at the publication date and is not personalised advice: a specific situation is assessed on documents. Report an error to contact@financialservices.lu: the correction is dated in the article.