Acquiring, developing, holding or managing Real Estate properties in Luxembourg or abroad
Luxembourg real estate investment vehicles may be used by institutional investors, real estate promoters, developers or private investors.
Indeed, many Luxembourg real estate companies are set up:
Luxembourg real estate vehicles can be separated into regulated and unregulated vehicles.
Regulated real estate vehicles are used to collect funding from public or private placement:
Non regulated vehicles are:
Investors in Luxembourg real estate vehicles may have different aims depending on their status, such as:
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Institutional investors,- for example real estate funds, insurance companies, real estate private equity firms - who generally invest in real estate in Luxembourg or abroad to let the properties directly or through a special purpose vehicle
Luxembourg Real Estate Vehicles investing abroad
Within the frame of double tax treaties, Luxembourg often exempts the income derived from real estate situated abroad.
As such, the Luxembourg company becomes liable for tax in the country where the real estate is located . The taxable income is calculated following the rules of this country (each of which has its own taxation regime for real estate and some tax deductions are generally granted for interests and costs paid abroad or amortisation of the asset). Only the net profit is taxable in this country and receives a full tax exemption in Luxembourg (corporate and wealth tax).
Should the country not have signed a double tax treaty with Luxembourg, the taxable profit will not be exempted in Luxembourg; however, it can be reduced by any costs or charges associated with the real estate activity realised abroad i.e. any interest payable on debts (mortgage or other bonds/debt instruments issued by the company) will be taken into consideration when calculating the tax liability in Luxembourg.
Real Estate in Luxembourg or abroad via a participation in a company
Investors may choose to invest indirectly, via a stake into another real estate special purpose vehicle ( such as a company established in Luxembourg or abroad). In this case, the company may benefit from the participation exemption upon disposal of the shares in this real estate SPV (or when receiving dividends from this vehicle).
Double tax treaties and European directives may reduce or cancel any withholding tax at source.
Other countries follow the OECD model tax convention which aims to tax real estate income at source when they are situated in another land.
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Regulated or
Unregulated 