On January 20th 2022, the Luxembourg tax authorities (“LTA”) issued circular PRE_IMM n° 1 (the “Circular”), regarding the 20% real estate levy (the “Real Estate Levy”) introduced by the Luxembourg law of 19 December 2020 (the “Law”) and applicable since fiscal year 2021.
The aim of the Circular is to provide investment vehicles with guidance in respect of the Luxembourg Real Estate Levy. Notification obligations also apply to certain Luxembourg investment entities, which have never held real estate assets located in Luxembourg.
As a reminder, the Law introduced the 20% Real Estate Levy, which is payable by certain Luxembourg investment vehicles owning real estate located in Luxembourg as further detailed below. Further, these Luxembourg investment vehicles are also subject to a mandatory reporting.
The Circular reminds that even though the Real Estate Levy only applies to revenues generated by Luxembourg-based real estate assets, all "non-transparent" Luxembourg investment vehicles, even if they do not own Luxembourg real estate assets, are subject to specific notification requirements that must be met by May 31, 2022.
Guidance provided by the Circular
Scope of application
The Real Estate Levy is applied on income (rental income or capital gains) derived from real estate assets located in Luxembourg and held by certain types of investment vehicles. Concerned Investment vehicles are (i) specialized investment funds (SIFs), (ii) “Part II” undertakings for collective investment (UCIs) and (iii) reserved alternative investment funds (RAIFs), that are organized in corporate form (i.e. SA, SCA or S.à r.l.) (the “In-Scope Funds”). The Real Estate Levy applies to real estate assets located in Luxembourg, whether they are held directly by In-Scope Funds directly or indirectly through tax transparent entities or fonds commun de placement (the “FCPs”).
Please refer to our previous Newsflash for further insights.
Real Estate Levy - Compliance requirements
All Luxembourg In-Scope Funds owning Luxembourg located real estate assets must, by 31st May 2022, proceed with the filing of the Real Estate Levy return through the Myguichet.lu platform, indicating the details on the real estate income subject to the Real Estate Levy (the “Filing”).
Additionally, all Luxembourg In-Scope Funds must notify the Luxembourg tax authorities by 31st May 2022 (the “Notification”) at the latest of whether:
They directly held Luxembourg based real estate assets at any point in time during the years 2020 and 2021;
They, indirectly through tax transparent vehicles or FCPs, held Luxembourg based real estate assets at any point in time during the years 2020 and 2021;
They did not hold Luxembourg based real estate assets directly at any point in time during the years 2020 and 2021;
They did not hold Luxembourg based real estate assets, indirectly through tax transparent vehicles or FCPs, at any point in time during the years 2020 and 2021; and
They would have qualified as an In-Scope Fund, but changed their legal form to tax-transparent entities or FCPs, at any time in 2020 or 2021 while owning at least one Luxembourg based real estate asset at the time of that transformation.
Real Estate Levy Filing
The Filing must take place no later than 31st May of the year following the calendar year in which the income was realised, the first filing date being 31st May 2022 for income earned in 2021. The specific form is named : ACD – Prélèvement immobilier: Déclaration pour le prélèvement immobilier.
The Filing shall include the following information:
Amount of income generated by the Luxembourg located real estate asset subject to the Real Estate Levy;
Breakdown of the income per real estate asset;
Amount of the Real Estate Levy; and
Report from an independent auditor certifying the proper computation of the income subject to the Real Estate Levy in accordance with the provisions of the Law.
Mandatory Notification for the years 2020 and 2021
As detailed above, a separate Notification needs to be made by In-Scope Funds to confirm their ownership or lack of ownership of Luxembourg based real estate assets as well as by investment funds that would have qualified as In-Scope Funds, but changed their legal form to tax-transparent entities or FCPs, at any time in 2020 or 2021 while owning at least one Luxembourg based real estate asset at the time of that transformation.
The Notification must be filed via the form : « ACD (Prélèvement immobilier) : Déclaration informative sur la détention ou l’absence de détention d’un bien immobilier sis au Grand-Duché de Luxembourg et sur le changement de forme juridique».
Any failure to satisfy the above compliance requirements in a timely manner may be sanctioned by a fine of up to EUR 10,000.
All In-Scope Funds that hold Luxembourg real estate assets either directly or indirectly through tax transparent entities or FCPs must: (i) file a return declaring their qualifying income; and (ii) notify the ownership.
In addition, In-Scope Funds owning no Luxembourg based real estate assets as well as all investment fund vehicles that would have qualified as In-Scope Funds if they had not changed their corporate form in 2020 or 2021 must notify the Luxembourg tax authorities by 31st May 2022.