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Are you a Luxembourg resident interested in purchasing a property abroad? Whether you are thinking of investing in a second home or a buy-to-let, Banque de Luxembourg offers comprehensive support at every stage of your project: from purchase to managing your investment and inheritance planning.
Cross-border investments: key considerations
When you decide to invest in a property, especially if it is in another country, there are several questions to consider before determining the best financing approach:
- What is my budget? What stamp duty should I expect to pay in France, Belgium and Germany?
- What recurring fees will I need to pay in these countries?
- What are the tax and inheritance implications of owning a property in another country? How will it affect my tax situation in Luxembourg?
- In which country should I invest? How much collateral will I need in France, Belgium or Germany?
- Which tax system will apply - the system of the country where the property is located?
- Should I buy directly or through a company?
- What is the purpose of the investment: will it be used as a second residence or a rental property? If it is rented out, how will the rental income be taxed?
The answers to these questions vary depending on the country in which the property is located and the purpose of the investment.
3 key takeaways for France
- It is important to specify from the outset if the property will be rented out.
- There may be strong advantages in taking out a loan.
- To manage inheritance costs efficiently, think carefully about whether the property will be held directly or via a company.
3 key takeaways for Belgium
- There are significant tax advantages in renting out a residential property.
- Holding a property through a Luxembourg property investment company (an SCI - Société Civile Immobilière) offers benefits when it comes to inheritance tax but it carries some income tax risks.
- As a rule, individuals are not taxed on capital gains unless the property is sold within five years of purchase.
3 key takeaways for Germany
- The financing solution will be determined by the duration of ownership and whether the property is rented out.
- As a rule, individuals are not taxed on capital gains for a property that is sold more than ten years after purchase.
- A loan can reduce the taxable base of the rental income through deductible interest and also lower the inheritance tax base.
As everyone has different individual needs and situations, we always offer tailored solutions that consider every aspect of your project. Our advisers will assess all the tax, wealth, financial and personal components of your project with you, calling on the support of our tax specialists and Family Office if necessary, to guide you in your decisions.
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