According to the Luxembourg VAT Authorities, a rent-free period in a lease contract leads to an absence of VATable income for the landlord during a given period of time. This, in turn, allegedly results in an obligation for the landlord to regularize and pay back part of the input VAT it has already deducted.
This new decision is of significant importance for the Luxembourg real-estate market, where commercial negotiations frequently lead to rent free periods being granted, sometimes for durations of more than a year.
Real estate promoters and landlords should now take active steps in reviewing their past and present VAT positions in light of this new decision, in particular with certain statutes of limitation lapsing soon.
Our VAT team stands ready to assist you in reviewing your VAT position, including for past VAT adjustments performed by the VAT Authorities.