How do I declare my rental income in Luxembourg?
Building your wealth involves many questions: Where to invest? Should you choose a new or old property? How to declare your rental income in Luxembourg? Also, how much will be taxed? How to reduce the tax impact?
Who must declare rental income in Luxembourg?
Owners of rental properties in Luxembourg are obliged to declare their income in Luxembourg, as this income is not subject to withholding tax.
Likewise, assimilated non-residents who have income from rentals abroad must declare this income in Luxembourg.
How is the net rental income determined in Luxembourg?
The taxable income derived from leased real property is determined as follows:
Net rental income = Gross rent (excluding charges) - Amortization - Fees and expenses
What can be deducted from rental income?
Fees are deductible from rental income and include the following items:
- Maintenance and repair costs
- Interest expenses
- Management fees
- Property taxes
Amortization is also an important element in the calculation. Indeed, Luxembourg allows to deduct the depreciation of the rented property.
The following are subject to depreciation: the price of the construction (excluding the land), the deed costs, the transfer duty, as well as the investment expenses subsequent to the purchase or the construction, the amount of which exceeds 20% of the acquisition price of the property.
Therefore, for assets completed before January 1, 2021, the amortization rate varies according to the year of completion of the asset:
- Less than 6 years old: 6%.
- Between 6 and 60 years old: 2%.
- More than 60 years old: 3%.
For all assets that were completed after January 1, 2021, the amortization rate will be determined as follows:
- Less than 5 years old: 4%.
- From 5 to 60 years old: 2%.
- Over 60 years old: 3%.
The following are affected by this change: owners of property purchased under a pre-construction agreement (VEFA) that has not been completed before December 31, 2020, as well as all investors in new or pre-construction housing as of January 1, 2021.
NB: If you rent your property as part of a social rental management, then you can claim a tax exemption of 50% of the rental income.
Example: a house built in 1987 (purchase price without the land: 200 000 euros) is rented. The rent is 600 euros per month.
The property tax is 150 euros and the owners have paid 500 euros in interest on the loan financing this property.
In 2021, the owner has done various works (maintenance of the roof and repair of the facade) for a total amount of 5 000 euros.
Gross annual income = 600 € x 12 = 7 200 €
Deduction of maintenance and repair costs = - 5 000 €
Deduction of amortization = 200 000 € x 2% = - 4 000 €
Interest expenses = - 500 €.
Property tax = - 150 €
Net income from rental property = - 2 450 €
How to declare rental income in Luxembourg?
The declaration of rental income in Luxembourg involves completing form 190.
To make it easier for you, you can fill it out on taxx.lu
with a comprehensive form, which will do all the necessary calculations for you.