Personal taxation · Luxembourg
Rental loss and mortgage interest in Luxembourg
A rental loss is determined after qualifying the receipts and the allowable expenses. It is not simply loan instalments exceeding the rent. Its treatment must be checked according to the property, the income category and the applicable tax treaty.
Financial Services Luxembourg · Licensed accountant · Head of the firm: Mickaël LOC. Editorial update: .
Calculate the result before the tax effect
Repayment of the principal is not an interest expense. Depreciation, on the other hand, can reduce the result without being a payment made during the year. The tax result and the cash flow therefore do not answer the same question.
Charges recovered from the tenant and capital expenditure must not be treated as ordinary expenses without checking.
Property in Luxembourg and property abroad
For private lettings under the ordinary Luxembourg regime, the Luxembourg Inland Revenue (ACD) describes offsetting losses against net income from other categories in the same year. This rule must not be extended without analysis to all exempt foreign property income or to another activity.
A carry-forward to another year cannot be presumed. Exemption with progression for a foreign property and tax treaty rules can lead to different treatment.
Fictitious example
The annual rent is lower than the loan instalments, but a large part of the instalments repays capital. The property is not automatically loss-making for tax purposes. The interest, the allowable expenses and the qualifying depreciation need to be isolated.
Conversely, a negative tax result does not prove that no cash is available, nor does it mean the owner can count on a refund from their return.
Checks to keep on file
- Result per property, year and ownership share.
- Interest certificate and breakdown of the loan.
- Supporting evidence for works and depreciation.
- Location of the property, tax treaty and the income against which a loss could be set.
The firm’s other tax engagements
Depending on your situation, the firm also handles tax, VAT and payroll, the regularisation of late tax filings and assistance during a tax audit. Fees are listed in the firm’s fee grid.
Official sources and scope
The rules apply to the year and profile concerned. Examples flagged as fictitious explain a method; they are not an individual validation. The documents and options of your file are covered by a separate engagement.