Luxembourg real estate levy: Compliance obligations for Luxembourg investment vehicles

The Luxembourg tax authorities (“LTA”) released a new circular on 20 January 2022 (PRE_IMM n°1) (the “Circular”) regarding the real estate levy previously introduced by the Luxembourg law of 19 December 2020 (the “Law”).

As from 1 January 2021, a 20% real estate levy (the “Real Estate Levy”) applies to real estate income derived by certain Luxembourg tax opaque investment vehicles owning directly, or indirectly through tax transparent entities, real estate assets located in Luxembourg.

Scope of application of the Real Estate Levy

Personal scope

The Law targets the following tax opaque investment vehicles (“Investment Vehicles”):

  • Undertakings for collective investment (UCIs) falling under Part II of the amended law of 17 December 2010 concerning undertakings for collective investment;
  • Specialized Investment Funds (SIFs) referred to in the amended law of 13 February 2007; and
  • Reserved Alternative Investment Funds (RAIFs) referred to in art. 1 of the amended law of 23 July 2016

The Investment Vehicles should be considered as tax opaque when the take the form of an S.C.A., an S.A., an SE or an S.à r.l.

Material scope

The Real Estate Levy applies to the following forms of real estate income (“Real Estate Income”) to the extent received or realized by an Investment Vehicle:

  • Gross rental income generated by real estate located in Luxembourg;
  • Capital gains realized on the alienation of real estate located in Luxembourg; and
  • Capital gains realized on the alienation of interests in tax transparent entities holding real estate located in Luxembourg.

Compliance requirements

The Circular provides information regarding the reporting obligations of the Investment Vehicles in relation to the Law.

An annual reporting

Each year, and to the extent an Investment Vehicle receives or realizes Real Estate Income derived from Luxembourg based real estate, a real estate levy return (ACD – Prélèvement immobilier: Déclaration pour le prélèvement immobilier) (the “Annual Reporting”) must be submitted by 31 May of the following year. The related Real Estate Levy must be paid no later than 10 June, i.e. a few days after the filing deadline. As an example, in relation to Real Estate Income of 2021, the Annual Reporting should be filed no later than 31 May 2022 and the levy should be paid no later than 10 June 2022).

The Annual Reporting shall include the following information:

  • Amount of Real Estate Income derived from Luxembourg based real estate;
  • Breakdown of the Real Estate Income per real estate asset;
  • Amount of Real Estate Levy; and
  • report from an independent auditor certifying the proper computation of the Real Estate Income.

A mandatory notification obligation

In addition to the Annual Reporting, a mandatory one-time notification (the “Notification”) has been introduced by the Law for calendar years 2020 and 2021, applying to all Luxembourg Investment Vehicles (as defined above), regardless of whether they hold Luxembourg real estate or not. All Luxembourg Investment Vehicles will have to notify by 31 May 2022 whether or not they held Luxembourg real estate during calendar years 2020 and 2021 (Prélèvement immobilier: Déclaration informative sur la détention ou l’absence de détention d’un bien immobilier sis au Grand-Duché de Luxembourg et sur le changement de forme juridique).

This Notification will confirm:

  • The ownership /absence of ownership of Luxembourg based real estate assets at any point of time during 2020 and 2021; and
  • The change (if any) of legal form at any point of time during 2020 and 2021, from a tax opaque to a tax transparent entity, to the extent the Investment Vehicle owned at least one Luxembourg real estate asset at the time of the change of legal form.

Non-compliance with the mandatory Notification may trigger a fixed fine of EUR 10,000.

To the extent an Investment Vehicle has performed the Annual Reporting by 31 May 2022, it will be considered as having complied with its mandatory Notification obligation.

Johan Léonard - Partner Luxembourg

Anaïs Bracqbien - Associate Luxembourg

Pierrick Romancant - Junior Associate Luxembourg