Context and issues

In Luxembourg, the collection of property taxes is governed by mechanisms derived from German law introduced during the German occupation, and the definition of unit values goes back to 1941. In practice, Luxembourg property taxes are so low as to be almost negligible.

In 2018, the German Constitutional Court (Bundesverfassungsgericht) decided that the property tax regime applicable in Germany at that time was unconstitutional. The Court deemed that the lack of a unit value update lead to value distortions incompatible with the principle of equality.

In Luxembourg, Bill No. 8082 introduced in 2022 aimed in the same vein at reforming property taxes (IFON) but went further by adding two new taxes: a land mobilization tax (IMOB) and a vacant housing tax (INOL).

Faced with the housing crisis, the goal was not only to modernize property assessment, but also to encourage owners to develop buildable land and combat vacant housing.

However, the Council of State raised 22 formal objections to the bill, which was struggling to move forward.

Decision to split up the bill

In early July of 2025, members of Parliament decided to split Bill No. 8082 into two separate sections:

  • Bill 8082A, reforming property taxes and introducing a land mobilization tax (IMOB).
  • Bill 8082B, introducing a vacant housing tax (INOL).

This split aims to enable faster adoption of tax measures related to property tax and land mobilization, without waiting for the finalization of Bill No. 8086 on national and municipal building and housing registers (RNPP), essential for the INOL section but requiring the implementation of considerable resources at the municipal and state levels, which could take a long time.

Following the government’s announcement, the measures provided for in Bill 8082A are expected to come into force in 2028. They will only have a real impact in 2030, the first tax year, after a trial year in 2029. While this does mean a three-year delay on the initial schedule, this timeline seems to reflect the reality on the ground. Thus, the first statement should be sent to owners in 2030, and the rate—which is intended to be progressive over time—would apply for the first time after five years.

The amendments and their implications for real estate professionals and   local governments

On 17 July 2025, the government presented 66 amendments to Bill 8082A on property tax and land mobilization to a parliamentary committee. The clearly stated objective is to take action against real estate speculation more quickly by accelerating the provisions relating to the IMOB and the IFON.

It is clear that the government has largely taken into account the reservations expressed by the Council of State.

As a detailed presentation of all the amendments would exceed the scope of this article, a summary review of the main amendments will be presented here, the 273 pages of the draft government amendments can be consulted here.

  1. No INOL just yet

The section on vacant housing still requires the RNPPs, the subject of Bill No. 8086, delaying its adoption. Local authorities must therefore prepare for delayed implementation, which will have more specific implications for the management of vacant housing and exchanges between mayors and the tax authorities.

  1. Respect for municipal autonomy

The IFON’s status as a municipal tax has been restored, but the state administration has been involved in its computerized processing, while designating the direct tax administration as the sole point of contact with taxpayers for the establishment of the base value statement and the IMOB statement.

The mandatory tax range of between 9% and 11% provided for in the initial draft has been removed. Municipalities are thus free to set their own property tax rates, or “Hebesatz“, applicable to the municipal territory.

  1. More targeted application of the IMOB, mainly to land located in “new neighborhood” development plan areas.
  2. New property assessment model

The bill introduces a taxation model based on the actual value of land (the base value of plots should be calculated according to the principle developed in 2022, which consists of the building potential according to the general development plan, the distance from the City of Luxembourg, the surface area of the plot, and the services available in the locality), which is intended to be fairer, more automated, and more transparent. Real estate professionals and municipalities must prepare for more sophisticated valuation tools and automated tax return systems for both the IFON and the IMOB.

  1. Alternatives for communities

Local authorities will have the option of expanding their range of responses to speculation and land occupation, depending on the specific needs of their territory.

  1. Introduction of certain exemptions for the agricultural and wine-growing sectors
  2. Expansion of tax relief conditions for the IMOB

The age of children entitling parents to a reduction of the IMOB has been raised from 25 to 35 in order to allow (to a certain extent) the transfer of building land to children.

  1. No IMOB exemptions for investment funds and public developers
  2. Digitization of the complaint procedure against IFON and IMOB statements

Conclusion

The splitting of Bill No. 8082 into Bills 8082A (property taxes + land mobilization) and 8082B (vacant housing) aims at accelerating the IFON reform and the introduction of the IMOB, while confirming that the INOL component will have to wait until the finalization of the RNPPs.

For real estate professionals and local authorities, this reconfiguration involves proactively adapting to a new legal framework for land use—while preparing for the future, toward the regulation of residential occupancy.