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15 December 2020 / news

Luxembourg Court of Appeal confirms deductibility of input VAT even in case of rent-free periods in a VATable lease

The Luxembourg Court of Appeal has recently confirmed the decision of the Luxembourg Tribunal that a rent free period in a lease contract subject to VAT (thanks to having opted-in for VAT to be applied by the landlord and the tenant) does not trigger the landlord’s obligation to pay back part of the input VAT it has previously deducted.

VAT Luxembourg Appeal decision - house - VAT word - calculator

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. See more details about this debatable position in our previous flash news.

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.


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