Luxembourg has enacted the Budget Law for 2025, which includes modifications to the CO2 tax credits, VAT, and introduction of initiatives to revitalise the housing market; published in Official Gazette No. A 558 of 23 December 2024.

The law will increase the CO2 tax credit by EUR 24, bringing the total to EUR 192 effective from 1 January 2025. This initiative aims to alleviate the possible effects of the CO2 tax on individuals with low to moderate income.

It introduces a 50% reduction in the taxable base for registration and transcription duties on real estate acquisitions, in addition to the existing EUR 40,000 “Bëllegen Akt” tax credit for primary residence purchases. These provisions apply to properties purchased between 1 October 2024, and 30 June 2025, for primary residences or qualifying rental properties.

A new bill was also submitted to extend temporary 2024 housing measures through June 2025. These include increased tax credits for primary and investment properties, reduced capital gains tax rates, exemptions for social housing investments, and accelerated amortisation for off-plan purchases.

The VAT reform aligns rules with European Directives. The changes will affect small enterprises, digital events, and the art sector starting 1 January 2025.

The amended Pillar Two Law was enacted, incorporating OECD guidelines on minimum taxation with retroactive application to financial years starting after 31 December 2023.

Earlier, The Luxembourg Chamber of Deputies reviewed Bill 8406, proposing amendments to the law of 12 February 1979 on value added tax (VAT), aligning with Council Directive (EU) 2020/285 of 18 February 2020, Council Directive (EU) 2022/542, and the special scheme for small enterprises and Regulation (EU) 904/2010.

Luxembourg’s Parliament approved the 2025 budget law on 19 December 2024.

The Luxembourg government published the revised draft law amending the Global Minimum Taxation Law on 31 October 2024.