Following the introduction of a real estate income levy has been introduced as of January 1, 2021, a reporting obligation applies to all reserved alternative investment funds (RAIFs), specialised investment funds (SIFs) and alternative investment funds (AIFs) that have legal personality (see below).

The real estate levy applies to the funds of these types that receive or realise income from real estate (immovable property as defined by the Civil Code) located in Luxembourg. The levy is an exemption from the tax provisions set out in the SIF law of February 13, 2007, the investment fund law of December 17, 2010, in particular Part II funds, and the RAIF law of July 23, 2016.

The Prélèvement immobilier circular from the director of the Direct Taxation Authority (PRE_IMM n°1) was published on January 20, 2022, informing investment vehicles about the levy and the related reporting obligation. The authority is in charge of supervision, assessment and collection of the levy.

Which investment funds are covered by the real estate levy?

The investment funds covered by the levy are those with a legal personality distinct from that of their partners (SA, SCA or Sàrl), covered by Luxembourg’s legislation on Part II funds, SIFs and RAIFs, except for those constituted as a common limited partnership (SCS). Funds in the form of an SCS, SCSp or FCP are outside the scope of the levy.

What is the scope of the levy?

The levy applies to income from real estate located in Luxembourg, as defined below, received or earned by one of these investment vehicles, including when the income is received or realised indirectly by a fund through an FCP or transparent entity in which the investment vehicle holds shares or a stake in the course of the calendar year.

In addition, the receipt or realisation of income by a FCP or a transparent entity is also assessed directly and indirectly, as the income may be received directly or indirectly through one or more tax-transparent entities or FCPs.

What does income from real estate in Luxembourg mean?

Income from real estate is defined as income from the rental of real estate located in Luxembourg, any capital gain resulting from the sale of a property in Luxembourg, or income from the disposal of shares.

What are the reporting and payment obligations?

The rate of the real estate levy is 20%. Investment funds subject to the levy must declare all income from real estate subject to the real estate levy, received or realised during the calendar year, to the interest income withholding tax office by May 31 of the following year. Thus reporting on income for 2021 must be made by May 31, 2022 at the latest and the levy paid by June 10, with no possibility of deduction or offsetting.

What does the notification obligation contain?

RAIFs, SIFs and Part II AIFs with legal personality (except for those constituted as SCS) have an obligation to report to the interest income withholding tax office for the years 2020 and 2021. They must report whether or not, during any time in 2020 or 2021, they owned real estate in Luxembourg, either directly or indirectly, through one or more tax-transparent entities or FCPs. The reporting obligation applies to funds even if they did not invest directly or indirectly in real estate.

The reporting obligation also apply to funds with a legal personality separate from that of their partners and covered by Luxembourg’s Part II fund, SIF or RAIF legislation (except for SCSs) that changed their form during 2020 or 2021 to a fiscally transparent entity or to an FCP while they held at least one property in Luxembourg, either directly or indirectly through fiscally transparent entities or FCPs.

What is the penalty for non-compliance with the information obligation?

A fund that falls within the scope of the reporting obligation but fails to comply may be fined a flat-rate penalty of €10,000.

The Direct Taxation Authority’s Circular PRE_IMM n°1 (in French) can be found at: