If you're planning on renovating or building a home, you can take advantage of the low 3% VAT rate imposed by the state. Your work needs to be done on a home meant be used as a main residence.
The normal VAT rate is set at 17% in the Grand Duchy. To take advantage of the reduced rate, two options are available:
- A direct application of the ultra-low rate of 3% applied to invoices for eligible work performed various workers.
- Be reimbursed for the difference between the normal VAT rate and the reduced VAT rate. In this case, the person will have to file a reimbursement request with the Registration and Domains Administration.
Note that the amount received through this reimbursement method cannot exceed €50,000 per home created and/or renovated.
Creating a home means building a home, including garages or parking spots, but they must form a unit with the home being used as a main residence, transforming an existing building or portion of a building that was assigned for other purposes beforehand, or the expansion of an existing home by adding or extending the living spaces.
Renovating a home has to do with substantial improvements made to a home, which must be completed within 5 years from the acquisition, and substantial improvements to a home with a construction date of at least 20 years from the beginning of the work. These latter two cases must be completed within two years (renovation period with or without interruption).
Some work is excluded from the tax benefit scheme, such as movable equipment in equipped kitchens, some interior carpentry work, some special technical equipment such as the installation of alarms, plus other exceptions.
You can find all the conditions about this tax benefit scheme on the website of the government of the Grand Duchy of Luxembourg.