The levy only regards Luxembourg based real estate…
The real estate levy is a 20% flat tax that applies to certain Luxembourg investment vehicles on income derived from real estate assets situated in Luxembourg. Investment vehicles in scope are specialized investment funds (SIFs), “Part II” undertakings for collective investment (UCIs) and reserved alternative investment funds (RAIFs), organized in a corporate form (i.e. SA, SCA or S.à r.l.). The levy only applies to real estate assets situated in Luxembourg, whether they are held directly or through tax transparent entities or FCPs.
Income derived from foreign real estate is not in the scope...
… but the compliance obligations apply to all Luxembourg investment entities mentioned, also if not owning Luxembourg real estate
The Circular serves as a valuable reminder for Luxembourg investment vehicles to meet two important compliance deadlines:
1) Investment vehicles taking the form of tax opaque SIFs, UCIs or RAIFs in scope need to declare qualifying real estate income to the Luxembourg tax authorities by 31 May 2022; and
2) All investment vehicles taking the form of a tax opaque SIFs, UCIs or RAIFs, whether they ultimately derive income from real estate situated in Luxembourg or not, need to report to the Luxembourg tax authorities by 31 May 2022 whether:
- They did or did not directly own a real estate asset situated in Luxembourg during the years 2020 and 2021;
- They did or did not own a real estate asset situated in Luxembourg during the years 2020 and 2021 through a tax transparent entity or an FCP; and
- They changed their corporate form during the years 2020 and 2021 to become tax transparent or have adopted the form of a FCP and whether they owned – at the moment of this change of form – at least one real estate asset situated in Luxembourg, either directly or through a tax transparent entity or an FCP.
Failure to report the information in relation to the ownership of Luxembourg real estate or a change in corporate form within the required deadline may lead to a lump sum penalty of EUR 10,000.
Recommended course of action
As the information obligation is not limited to real estate investment funds, every Luxembourg investment vehicle taking the form of a tax opaque SIF, UCI or RAIF must report whether it owned, either directly or through a tax transparent entity or an FCP, a real estate asset situated in Luxembourg during 2020 and 2021 by 31 May 2022 at the latest.
We will keep you informed of further developments. Please reach out to your trusted Loyens & Loeff advisor for assistance in preparing and filing of these reports.