Taxes on fixed assets
Purchase
When a sole proprietorship is set up, the business manager may decide to purchase premises. These purchases will incur a registration fee of between 7 % and 10 %, depending on whether the premises are located in the city of Luxembourg (10 %) or elsewhere. The registration fees will form part of the purchase cost of the property and will be depreciated over its useful economic life.
The registration fees associated with the purchase of premises are collected by the notary when the deed is signed. The notary then transfers them within 15 days to the Luxembourg Land Registration and Estates Department (Administration de l'enregistrement et des domaines).
Construction
The registration fees are replaced by VAT at the rate of 15 % if the business manager has the property constructed. The VAT does not constitute a cost for the business if the business is itself subject to VAT on its turnover, which is generally the case. In this case, it may offset the VAT incurred on the purchase of the premises with the VAT that it receives on its own sales. The purchase of furniture, equipment, merchandise, etc., will also incur VAT, which can be recovered in the same way.
Leasing
If the business manager rents the premises, the rental payments will be subject to one of the following:
- a proportional registration fee of 0.6 % on the aggregate sum of the rental payments set forth in the rental agreement, if the rental term does not exceed 9 years;
- a proportional registration fee of 0.6 % if the rental term is 9 years;
- a proportional registration fee of 1.6 % if the rental term exceeds 9 years (0.6 % registration fee and 1 % transcription fee).
However, if the rental is subject to VAT, only a fixed fee of EUR 12 will be charged, irrespective of the rental term.
The registration fees associated with the rental of premises must be paid when the rental agreement is registered with the Luxembourg Land Registration and Estates Department. This registration must be carried out within 3 months of signing the rental agreement, failing which a fine equal to the amount of the fee will be payable.
Leasing
Property leasing also has a fixed registration fee of EUR 12 if it is subject to VAT. If the option is exercised at the end of the lease contract, a registration fee of 10 % (i.e. 6 % registration fee, 3 % communal surcharge and 1 % transcription fee) on the market value of the property is, however, collected for properties located in Luxembourg city and 7 % (no communal surcharge) for properties located elsewhere in the Grand Duchy.
Example: the manager of business 'E' takes out a rental agreement over 9 years with an annual rental payment of EUR 100,000. The registration fee will be 0.6 % x 100,000 x 9 years = EUR 5,400.
Alternatively 'E' intends to lease the premises. At the end of the 9th year, on the day on which the option is exercised, the property will be worth EUR 1,000,000. The lease contract has a fixed registration fee, but the registration fee will amount to 10 % x 1,000,000 = EUR 100,000 in ten years (the property is located in Luxembourg city).
Specific fixed registration fee
Capital duty was abolished in Luxembourg on 1 January 2009.
It was replaced by a specific fixed registration fee collected for the State on the following operations:
- setting up a civil company (société civile) or a commercial company with its registered office or central management in the Grand Duchy of Luxembourg;
- modification of the articles of association of a civil company or a commercial company with its registered office or central management in the Grand Duchy of Luxembourg;
- transfer of the registered office or central management of a civil company or a commercial company to the Grand Duchy of Luxembourg.
The specific fixed registration fee becomes payable from the date of presentation of the notarised deed for registration which must be carried out within the time frames set forth by law.
The specific fixed registration fee by way of remuneration is set at EUR 75.