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Luxembourg Signalled As One Of The Most Attractive Countries For Real Estate Investors

Luxembourg Signalled As One Of The Most Attractive Countries For Real Estate Investors

Research conducted by Taxand, the world's largest global organisation of tax advisors to multinational businesses has shown that Luxembourg is one of the least expensive countries in the World in which to sell residential and commercial property and for those looking to invest in buy-to-let.

The Taxand Total Tax Take (T3) research into the real estate market, conducted across 23 countries across the globe, reveals that the tax rate on residential sales is the fourth lowest of the countries analysed at a rate of 11.68%, but is still more than two times the tax rate in Malaysia which topped the table with the lowest rate of 5.34% when selling a residential property.

This low tax take on a residential property sale in Luxembourg is predominantly the result of the low rate of income tax combined with a relatively low VAT rate on residential sales, and is a significant factor for property investors to consider when looking to generate the greatest return on investment given the exorbitant tax rates of some neighbouring European jurisdictions.

Luxembourg ranks as follows in the Taxand rankings for tax taken on property investment and property sales:

  • No 21 for healthcare property with 24.12% of income taken by tax. Switzerland offer the best rate of 18.66% whilst the global average is 31.66%
  • No 19 for commercial property investment with 14.14% of income taken by tax. The global average is 25.40%
  • No 22 for apartment sales with 5.22% of the sale taken by tax. Romania is the most expensive country in which to sell an apartment, with 21.60% of the sale taken by tax. The global average is 14.61%
  • No 21 for buy-to-let property (home for rent) with 22% of the income taken by tax. China is the most expensive country for buy to let investments at 50%, with the global average coming in as 32.54%
  • No 17 and well below average for the tax taken on commercial property sales. Luxembourg ranks at 5.78% and the global average is 9.5% with Norway leading the table with 21.18%

Keith O'Donnell of Taxand, Global Head of Real Estate, at Taxand said:

"Our research throws up some interesting trends with regards to residential property within Europe as well as worldwide. Purchasing a new home in Luxembourg is a relatively low tax transaction mainly due to the generous VAT regime on new residential accommodation.

Property investors may well be surprised by these results and in light of them consider a shift in their investment portfolios to less tax-heavy jurisdictions in order to boost overall profits. Certainly, with governments reversing tax concessions in order to generate revenue, a growing number of investors could be tempted by the attractiveness of countries already exhibiting a lower tax take."

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Taxand T3 research methodology
Taxand has updated and expanded last year's T3 data.

To arrive at the figures, Taxand has taken into account VAT (or its local equivalent), corporate income tax, and property taxes. The property taxes were usually subject to various country-specific assumptions and modifications as they often differ on municipality basis or sometime just location basis. Those were reviewed by the coordinating Taxand team to assure comparability. Administrative fees, notary fees, court fees were excluded as having a relatively low impact on the overall tax take.

To ensure comparability of the results, certain data has been fixed such as size of the building, investment costs, and 100 percent non-interest bearing equity financing.

With all of that built into the model, Taxanders adopted it to the local law.

Your Taxand contact for further queries is:
Abigail Tarren, Global Operations Director
T. +44 (0)207715 5243

Taxand's Take

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