Application terms loosened (Wort.lu)

Starting from January 1, 2015 the VAT rates will be increased by two percent, with the only exception being the VAT applied on residential premises made available for rent, for which it will increase from 3 up to 17%. However, the government has agreed upon granting a transitional period of two years. Those who still want to profit from the three-percent rule are now provided with slightly loosened conditions.

No deed attested by a notary without vertical cadastre

So far any request for the application of a reduced VAT rate was to be lodged together with a copy of a notarial deed or construction contract. Now it will be enough to submit a copy of the contract signed between property developer and building contractor together with a confirmation issued by the land registry officeof the application submitted for approval by the so-called ‘vertical cadastre’. Without prior approval by the ‘vertical cadastre’ no deed attested by a notary public will be issued. “This procedure can sometimes take quite some time, so that many contractors cannot meet the requirements set by the law,” explains Mathis Mellina, Deputy Director of the Registry Office.  

Those who want to invest their money in an apartment to be then made available for rent and would like to exploit the three-percent rule can still do that, but they should first check with their respective developers that the relevant documents are submitted in due time, i.e. by January 1, 2015 at the latest, to the registry office.

This transitional period will come to an end on January 1, 2017. Any additional works which are carried out beyond that date will be charged with 17 percent.

Financial disadvantages also for first homes

Even though the government did announce this differently, also those who are about to buy a real estate for themselves have to reckon with an increase of the costs to be borne due to the general increase of the VAT by two percent. They will still profit from the super-reduced VAT but the maximum amount of € 50,000 will be reached once the construction price stands at € 357,143 and not at € 416,666 as it has been up to now. Any other construction works beyond that threshold will be charged with 17 percent.