Luxembourg 3 % housing VAT: conditions and AED procedure 2026
Everything to activate the 3% housing VAT benefit and save up to €50,000 on the construction, purchase or renovation of a Luxembourg dwelling.
01Principle and applicable rate
Luxembourg applies the super-reduced VAT rate of 3% to construction, conversion and renovation of dwellings used as housing, under article 44ter of the modified VAT law and AED circular no. 800. This rate is one of the lowest in Europe and a major tax advantage compared with the 17% standard rate in force since 2024 (formerly 16% in 2023, 17% standard outside temporary measures).
The mechanism is a tax credit: VAT is invoiced at 3% instead of 17%, saving 14 VAT points. This benefit is capped at €50,000 of VAT per dwelling, corresponding to about €357,000 of works excluding VAT at the reduced rate. Beyond, the 17% standard rate applies to the surplus.
02Eligibility conditions
The property must be used for housing: primary residence, secondary residence occupied by the buyer, or dwelling rented to a tenant who establishes their residence there. The dwelling must remain used for housing for at least two years after delivery or completion, on penalty of benefit clawback. For renovation, the dwelling must be over 20 years old (except creation of housing by conversion, with no age condition).
Eligible: new build, conversion of premises into housing (housing creation), renovation and repair of a dwelling over 20 years old (including structural work, finishing, insulation, heating, windows, bathroom). Excluded: commercial or office premises, non-attached garages, swimming pools, tennis courts, garden sheds, luxury outbuildings, and landscaped gardens.
03Procedure with the AED
Authorisation must be requested from the Registration, Estates and VAT Administration (AED) BEFORE works start or before signing a VEFA acquisition deed. The form (available on guichet.lu) is accompanied by housing plans, the building or planning permit, and a costed estimate of the works. The AED issues an approval decision specifying the maximum VAT amount eligible for the reduced rate (€50,000 cap).
For a VEFA, the developer invoices 3% VAT directly on the housing share, after obtaining the approval. For an individual builder or owner, two methods exist: direct 3% invoicing by tradespeople (if they hold the approval) or 17% invoicing followed by AED reimbursement of the difference upon presentation of invoices. The reimbursement request goes via the eAED teleprocedures.
04Worked examples
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| Project | Excl. VAT | VAT 17% | VAT 3% | Savings |
|---|---|---|---|---|
| Bathroom renovation | €30,000 | €5,100 | €900 | €4,200 |
| Heavy apartment renovation | €100,000 | €17,000 | €3,000 | €14,000 |
| New construction | €300,000 | €51,000 | €9,000 | €42,000 |
| High-end construction | €400,000 | €68,000 | €12,000 | €50,000 |
| Construction beyond cap | €500,000 | €85,000 | €27,000 | €50,000 |
Simulate your VEFA with the 3% housing VAT
Our VEFA simulator splits land/construction, computes 3% housing VAT with €50,000 cap, adds the Bëllegen Akt on the land share and gives the real total cost.
Run the VEFA simulationFrequently asked questions
Short answers to the most common questions on this topic.
What is the 3% VAT benefit cap in Luxembourg?
The benefit cap is €50,000 of VAT per dwelling over its lifetime. This corresponds to about €357,000 of works excluding VAT at the reduced rate. Beyond, the 17% standard rate applies to the surplus.
Is prior authorisation required for the 3% VAT?
Yes. A prior request must be submitted to the AED before any works start or VEFA acquisition deed is signed. The form is available on guichet.lu and must include plans, permit and a costed estimate.
Does the 3% VAT apply to a buy-to-let investment?
Yes, provided the tenant uses the dwelling as their residence (effective occupation). The property must remain rented as housing for at least two years after delivery, on penalty of benefit clawback.
Does the 3% VAT apply to renovation?
Yes, on renovation and repair of a dwelling over 20 years old, and with no age condition for creation of housing by conversion (e.g., turning a commercial premises into housing). Insulation, heating, windows, bathroom works are eligible. Decoration and luxury outdoor amenities are not.
Can the 3% VAT be combined with the Bëllegen Akt and Klimabonus?
Yes, the three schemes fully combine. For a first-time buyer in VEFA carrying out eligible energy renovation works, total savings can exceed €130,000.
What is the maximum habitable area entitled to the 3% VAT?
400 m² of habitable area. Beyond, the standard rate applies to the excess. Cellars, unconverted attics, non-attached garages and commercial parts are not counted in the habitable area.
Official sources
Statutes, circulars and publications consulted for this guide.
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