New Circular L.I.R. No. 106/2: What’s Changing for Property Depreciation

The Luxembourg Tax Authority (ACD) has published Circular L.I.R. No. 106/2, dated 12 August 2025.

This circular updates the rules on depreciation of buildings that are not part of a net invested asset, i.e. private property, with a direct impact on landlords, property owners and real estate investors.

The goal is to modernize, clarify and bring greater consistency to the tax framework for rental properties and renovations.

Updated depreciation rates

Ordinary buildings (non-rental residential use)

Less than 30 years: 1.5% (or 2% if higher wear and tear is proven)
30 to 60 years: 2% (or 2.5%)
Over 60 years: 3% (or 4%)

Very old buildings (acquired before 1941)

Depreciation base set at 3 × the unitary value
Depreciation rate: 2.5%, or 3% if higher wear and tear is justified

Rental housing

Standard rate: 2%
Accelerated rate: 4% for a maximum of two properties per taxpayer (four for jointly taxed couples), provided the property was completed less than five years ago
After five years, the rate reverts to 2%

Renovations

Renovations exceeding 20% of the purchase price: 4% for 5 years

Sustainable energy renovations, with state aid: 6% for 9 years

Tax incentives

Special real estate allowance (Article 129e L.I.R.)

Additional 1% deduction on the depreciable base of rental properties benefiting from the 4% rate
Capped at €10,000 per taxpayer
Doubled in the case of a collective declaration

Special construction allowance (Article 129f L.I.R.)

Applies to off-plan purchases (VEFA) between 1 January 2024 and 30 September 2025
Maximum amount: €250,00
Doubled in the case of a collective declaration

Key takeaway

With this circular, the ACD aims to make depreciation rules clearer for different property types, to strictly regulate the accelerated 4% rate, and to promote sustainable renovations through a preferential 6% rate.

In short, Circular L.I.R. No. 106/2 reshapes the fiscal landscape for property owners and investors. Knowing these rules is essential to optimize tax planning and investment strategies.

📄 Official source:
Circulaire L.I.R. n° 106/2 (PDF)