How to benefit from the super-reduced VAT rate?
MARCH 26, 2019 | PROPOSED BY OUR PARTNER ING LUXEMBOURG
In the Grand Duchy of Luxembourg, in real estate as in most other sectors, the standard rate of VAT is 17% since 1 January 2015. In some cases, however, you can benefit from the super-reduced rate of 3%. But what are the conditions for obtaining it and who can benefit?
The super-reduced rate of 3% was created by the state to stimulate housing construction . The work of creation and renovation of a dwelling are subject to this preferential tax system provided that it is assigned for purposes of main dwelling, either directly in the owner's head (for the creation and renovation) , or indirectly in the name of a tenant (for renovation only).
Pay attention to the notion of assignment!
This concept of assignment is important. It is she who will determine whether or not the VAT bonus is definitively acquired. You benefit from the super-reduced rate provided that the accommodation is assigned for purposes of main residence for a period of two years . In the absence of assignment or in the event of a change of assignment during the return period, you will be required to fully refund the tax credit.
But that does not stop you from selling ! The sale of housing is not taken into consideration. On the other hand, you will be taken into consideration that you have not used this dwelling for the purposes of a main dwelling before selling it and if the new owner does not personally occupy it and rent it if This is a new property. In the latter case, the burden of reimbursement is your responsibility because you have benefited from the tax benefit. An advice : If you sell your new property during the return period, make sure beforehand that it will be used by the proposed acquirer.
What are the eligible works?
Regarding the creation of a housing, are eligiblehousing construction, including the garage or the location (provided that it forms a unit with the housing serving as a main house), processing in housing of a building or part of an existing building previously used for other purposes (such as, for example, converting a barn or office into a dwelling ), the expansion of a dwelling existing by the addition or extension of living quarters, as well as the transformation of an existing dwelling into several new dwellings.
With regard to the renovation of a dwelling, the substantial improvement works carried out following the acquisition of a dwelling are eligible (they must be completed within 5 years of this acquisition), as well as Substantial work to improve a dwelling whose construction is at least 20 years old at the beginning of the work; in this case, the work must be completed within 2 years from the beginning.
Are excluded from VAT at the reduced rate movable equipment (including fitted kitchens) with the exception of heating stoves, interior carpentry other than stairs, ramps, doors and windowsills, interior blinds and curtains, special technical equipment such as an alarm system or photovoltaic panels, the layout of the surroundings with the exception of the direct access road to the house and the garage as well as notary fees, architect and consulting engineer.
Direct application or refund
There are two procedures to benefit from this tax favor whose total amount can not exceed € 50,000 per unit created or renovated.
The first is the direct application of the super-reduced rate : Eligible work carried out by tradesmen is charged directly at the rate of 3%. In order for this direct application to be effective, each of your suppliers must submit an application signed and countersigned by the Registration, Domains and VAT Administration (AED). Without this approval, the company is obliged to charge at the normal rate and you will have to use the refund procedure in order to benefit, if necessary, from the refund up to 3%. An advice : To avoid this procedure, ask your supplier to attach to his quote the application for the reduced rate.
The refund procedure is mainly used in case you have bought the building materials yourself . Caution, however : will only be reimbursed for invoices over € 1,250 excluding VAT, and as long as the refund request is for a total amount excluding VAT of more than € 3,000 and covers a minimum period of 6 months.
For more information, download the EDA Explanatory Brochure or see their Frequently Asked Questions (FAQ).
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