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EU: Luxembourg abolishes real estate CGT perk

08 April 2014   (0 Comments)
Posted by: Author: Ulrika Lomas
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Author: Ulrika Lomas (Tax-news)

Luxembourg's Governing Council has adopted draft legislation abolishing the regime allowing the deferred taxation of real estate capital gains reinvested in a replacement property in the Grand Duchy. 

The bill takes into consideration the reasoned opinion issued by the European Commission on February 20, 2014, challenging the "discriminatory regime" applied, and ensures future compliance with European Union (EU) and European Economic Area (EEA) legislation. 

Under current legislation, capital gains resulting from the sale of property that are reinvested in real estate abroad are taxable immediately, whereas tax on gains may be temporarily deferred if the capital is reinvested in property in Luxembourg. This arrangement applies to natural persons who own property in Luxembourg regardless of whether they are resident in Luxembourg or in another EU/EEA country. 

The European Commission said the regime constitutes an unjustified restriction on the free movement of services and free movement of capital in Articles 56 and 63 of the Treaty on the Functioning of the European Union (TFEU) and the corresponding Articles 36 and 40 of the EEA Agreement. Brussels formally requested that the provisions be repealed. 

During the same sitting, the Governing Council also adopted a bill enhancing the procedure for the exchange of tax information upon request. Improvements were necessary after the Global Forum deemed the Grand Duchy to be "non compliant" in transparency and tax information exchange at the end of 2013. 

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Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.


The Act requires that a minimum academic and practical requirments be set to register with a controlling body. Click here for the minimum requirements of SAIT.

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