Land tax and the mobilisation of land and housing

The current land tax (IFON) in Luxembourg dates back to the 1930s. Its reform has been part of the political discussion for years. The reform of the IFON is a key element of the package of measures to combat the increasing housing shortage in Luxembourg, which the government has presented together with the introduction of a tax on the mobilisation of land (IMOB) and a tax on the non-occupation of housing (INOL).

The objectives of the bill

The coalition agreement 2018-2023 states that “the reform of the land tax, which aims to discourage speculation, will be linked to the reform of the “new generation” General Development Plans (PAG). A tax exemption on owner-occupied real estate will be introduced. The reform of the land tax will provide an opportunity to replace and simplify the system of specific municipal taxes for non-occupation or non-use of certain properties for construction purposes”.

The draft bill on the land tax, the land mobilisation tax and the tax on the non-occupation of housing and complements the broad lines set out in the coalition agreement by setting the following main objectives:

  • Eliminate the inequalities caused by the current land tax;
  • Creating a new land evaluation model to establish the base value for objective, transparent and fair taxation;
  • Addressing the housing shortage by incentivising owners to mobilise their land and make their existing housing available on the rental market.

The bill also foresees to:

  • maintain the municipal character of the land tax;
  • reduce the tax burden on the owners' main residence;
  • replace the specific municipal tax on non-occupancy with a uniform and more efficient national tax;
  • establish a national register of non-occupied buildings and dwellings;
  • use land mobilisation as a guiding tool in spatial planning;
  • develop efficient IT tools that allow for regular and largely automated updating of property evaluation.

The land tax, firstly, taxes land in urban areas or areas designated for urbanisation whose main purpose is the construction of buildings. The amount of the tax bases itself on the inherent value of the land, largely conditioned by the building potential according to the classification in the General Development Plans (PAG).

Secondly, the land mobilisation tax aims to create an incentive for the actual construction of buildings on land earmarked for urbanisation. Otherwise, the mobilisation tax becomes payable.

Finally, the tax on the non-occupation of housing aims to tax the building constructed for residential purposes that remains unoccupied.

History of the land tax

In the Grand Duchy of Luxembourg, the land tax is one of the oldest taxes, but also one of the taxes whose reform has been awaited the longest.

The land tax was first introduced in the First French Republic in the form of the “contribution foncière” by the law of 3 Frimaire of the year VII (23 November 1798), when the country was part of the “Département des Forêts”. Its current form goes back to the German Land Tax Act (GrStG) of 1 December 1936 and the German Valuation Act (BewG) of 16 October 1934. After these texts were introduced by the German occupying power in Luxembourg during the Second World War, their continued validity was confirmed by the Grand Ducal Decree of 26 October 1944 on taxes, levies, contributions and fees.

The taxation procedure consists of two main steps. First, the Luxembourg Inland Revenue must periodically determine the basic values of the tax units by sending a unit value sheet to the taxpayer. Then, each municipality annually decides its municipal tax rate, by which the above-mentioned unit value is multiplied, before notifying the taxpayer of the tax amount due in the form of the land tax assessment notice.

However, it quickly became apparent in both Luxembourg and Germany that the regular updating of these assessments was particularly cumbersome, as it had to be done individually and manually for each parcel of land. These reassessments proved so laborious that the values currently used in Luxembourg have not been updated since 1941. In Germany, where the last general fixing of land values dates back to 1964 and even to 1935 for the territory of the former German Democratic Republic, these evaluations were the subject of a landmark ruling by the Federal Constitutional Court on 10 April 2018. While the judges in Karlsruhe found that the lack of representativeness of the land values determined did not in itself constitute an unconstitutionality, they declared that the land evaluation system violated the constitutional principle of equal treatment, as it led to unequal treatment of comparable properties caused by the outdated land value determination. It follows that the German land tax is based on a foundation that violates the German Constitution.

The Luxembourg system, which is virtually identical to the German one with the exception of some minor adjustments made over the years, therefore faces the same accusations.

The new system must therefore first eliminate the inequalities that result from the current system. While certain differences between municipalities are inherent and acceptable in a system where municipal autonomy dictates that the municipal council can adjust the tax rate, the differences are found not only between municipalities but also within a municipality and for the same type of property.

A new formula for the evaluation of land

The objective of the bill is to revalue all land, ensuring that the proportions of land values are maintained in determining the tax base.

The system used for this purpose must be fair, objective and transparent. The evaluation of real estate must take into account the proportions of actual values in order for the system to be fair and for the tax to respect the principle of proportionality and equality before the law. Thus, if the market values of two given properties are €250,000 and €500,000 respectively, the tax evaluation system must reflect that the first property is worth twice as much as the second.

The new formula for evaluing land takes into account the most determining factors, namely:

  1. the building potential,
  2. the type of permitted use,
  3. the geographical location,
  4. the stage of development (immediate or non-immediate availability for construction),
  5. the available surface,
  6. the number of facilities and services available nearby,
  7. the general price level for real estate.
Explanation of the factors

The value of a property is largely determined by its geographical location, its surface, as well as the building potential and the types of use permitted by the PAG. In this context, it should be noted that only the new generation PAGs, revised on the basis of the amended Act of 19 July 2004 on Municipal Spatial Planning and Urban Development, allow for automatic, computerised recognition of this potential. The reform of the land tax therefore depends on the completion of the revision of the PAGs, or at least a representative part of them, so that the test phases of the IT tools can run on sufficient data sets.

The most important parameter determining the value of a plot of land is its geographical location and, in particular, its distance from the city of Luxembourg. In fact, studies by the “Observatoire de l'Habitat” have long confirmed that land prices decrease exponentially with increasing distance from the capital. The choice has been made to take into account the travel time to the city of Luxembourg rather than the travel distance, as this is the main factor in the choice of habitual residence. Indeed, land and buildings with good accessibility generally show higher demand and therefore higher land values. To ensure the representativeness of the data, the factors used in the bill are based, among other things, on actual data observed and extrapolated over the course of a year.

In addition, the formula allows for the consideration of another factor, namely the number of facilities and services available in the vicinity of a given plot of land, and serves as an indicator of another related factor, namely the attractiveness of the locality in terms of distance between home and work. This is because the presence of schools, high schools or shopping facilities in particular exerts a considerable influence on property prices.

Finally, the formula allows for a constant and automatic updating of the tax by taking into account the evolution of the general level of real estate prices, determined on the basis of real data, thus avoiding that the taxed amounts no longer correspond to reality as a result of developments on the real estate market.

In order to keep the data necessary for the valuation of the properties up to date, these data are reassessed at regular intervals. For example, the travel time to Luxembourg City varies according to the volume of traffic, which in turn depends on the development of transport infrastructure, population growth, the use of public transport or soft mobility, the development of teleworking, etc.

The model for the evaluation of land to determine the tax base has been scientifically verified and calibrated by the Luxembourg Institute of Socio-Economic Research (LISER). Their study (in French) can be downloaded here.

The new land tax

The amount of land tax to be paid depends on the basic value of the property, possibly divided among several owners, the municipal tax rate and potential deductions. To enable citizens to estimate already now the land tax they will have to pay after the reform, the government has set up a simulator that can be reached by clicking on the image below.

The basic value of the land is determined using the formula explained above. At this stage, only properties whose reform of the PAG has been completed can be taken into account.

The municipal character of the land tax will remain after the reform. The municipality sets the tax rate, which can range from 9% to 11%. Since it is not known at this stage what tax rate the individual municipalities will set, the simulator shows the range in which the land tax can move.

Finally, the government has provided an allowance for owners who live on their own property. This allowance is part of the fight against the housing shortage and is intended to reduce housing costs for taxpayers who only own the building that serves as their usual residence.


The revenue from this municipal tax will amount to between approximately 39 and 47 million euros per year, depending on the municipal tax rate that the municipalities will set. As a reminder, in 2021, the land tax in its current form had generated revenues of around 39.1 million euros.

Introduction of a national tax on the mobilisation of land

Few municipalities have used the existing land mobilisation instruments at the local level, especially the current B6 land tax, so that they have never had the desired effect.

Therefore, the government proposes to replace these local instruments with a land mobilisation tax at the national level, leading to a uniform situation across the country and making this new instrument a mandatory rather than a voluntary one. The tax applies where construction can take place, regardless of ownership and cadastral boundaries.

If a plot is of a size or configuration that does not lend itself to the construction of dwellings in compliance with the prescribed setbacks or dimensions, it will not be taxed. Similarly, no tax is levied on land that already has buildings and on which no additional buildings can be constructed. However, a plot of land with a residual area sufficient to construct a new building, even if a building already exists, is taxed if the available space is not used.



This tax requires the establishment of a national register of undeveloped land, listing all land available for development under the PAG and PAP. A distinction is made between developed land, which is immediately available for construction, and undeveloped land, which requires prior road works and public facilities and thus takes longer until constructions are possible.

The tax amount is then adjusted for each category depending on how many years the land has remained undeveloped and whether it is based in a priority area in terms of spatial planning policy. The progressive development of the tax rate over the years allows increasing the incentive to build over time while granting owners time to plan for construction. The longer it takes to build on an undeveloped plot, the higher the rate increases. Most importantly, the progression of the rate also allows the construction industry to respond to and anticipate possible increases in demand.

The following chart illustrates different tax rates and their progression:



Finally, the government plans to introduce a flat rate deduction per child under the age of 25. This measure will exempt one plot of land of an appropriate size to enable the construction of a single-family house per child from the tax.

The tax on land mobilisation will be a national tax, the revenue from which will go entirely to the state. Tax rates are progressive over time. Therefore, the revenues are also progressive. At the beginning of the tax's entry into force, revenues will be zero, but they will develop steadily over time depending on the mobilisation of land. According to initial simulations, the tax will generate revenues of 4 million euros five years after its introduction. After 20 years, revenues will amount to over 270 million euros.

The introduction of a national tax on the non-occupation of housing

L’introduction d’un impôt national sur les logements non-occupés est complémentaire à la réforme de l’impôt foncier et à l’impôt à la mobilisation de terrains. Par l’introduction de cet impôt, le gouvernement entend mobiliser les logements existants non habités.

L‘impôt communal sur les logements non-occupés, introduit en 2008 à titre facultatif dans le cadre du Pacte logement 1.0 n’ayant pas porté les résultats escomptés, sera à l’avenir remplacé par ce nouvel impôt national obligatoire.

Un logement est considéré non-occupé si aucune personne physique n'est inscrite au registre national des personnes physiques pendant une période de six mois consécutifs. La commune peut encore considérer d’autres cas de figure énumérés par la loi. Il revient à la commune de constater l’inoccupation des logements sur son territoire et de fournir les informations nécessaires à l’Administration des contributions directes. Celle-ci sera compétente pour la fixation, la perception et le recouvrement dudit impôt.


Once the municipality has established the non-occupancy of a dwelling, the non-occupancy tax amounts to 3,000 euros per dwelling in the first year. In subsequent years, the tax is increased by 900 euros per year up to a maximum of 7,500 euros. If the dwelling remains vacant, this amount is due annually. The revenue from this national tax will amount to about 14 million per year.

The collection of the tax on the non-occupation of housing requires the establishment of a national register of buildings and dwellings “RNBL”.

The first objective of the RNBL is to assign a unique identification number to all types of buildings and to each separate housing unit that is part of a building. This will allow municipalities to register their residents not only at an address on their territory, but also in a dwelling identified by its national identification number. This is essential to implement the tax on the non-occupation of housing.

FAQ : Questions / Answers

General questions
Who has to pay the taxes?

The owners of land, undeveloped land and unoccupied housing respectively owe the three taxes.

Which taxpayers are exempt from paying the taxes?

The current exemptions from the land tax will remain in the new system. For example, the state and public developers, municipalities and municipal syndicates as well as non-profit foundations and non-profit associations are exempt from the tax.

However, none of these actors will be exempt from the tax on the mobilisation of land or the tax on the non-occupation of housing.

Who has to pay the taxes if I buy or sell my property during the year?

All three taxes are due annually, payable from 1 January of the calendar year. So if you own a property on 1 January, you have to pay the annual tax. If you sell during the year, paying the tax or part of the tax may be part of the negotiation of the sale price.

When will the taxes be levied for the first time?

Preparing for the implementation of this reform requires at least two years, given the amount of work involved. Following the legislative process, several very complex IT tools need to be programmed for the automated calculation of the base value, the register of undeveloped land and IT support for municipalities in tax assessment. Inventories of all undeveloped land and unoccupied dwellings throughout the country need to be compiled in order to create the relevant registers. It is expected that the development of the national register of buildings and dwellings, which will specifically include all buildings and dwellings, will be completed no later than three years after the relevant laws come into force. Consequently, the application of the INOL can take place 12 months later at the earliest.

Should the bill pass Parliament in July 2023, i.e. before the end of the current legislative period, the law would come into force by September 2025. With the implementation of all the necessary steps, the new land tax would therefore be applicable in January 2026 and thus payable in 2027 at the earliest. The INOL would be payable in 2028 at the earliest. The IMOB would be applicable from January 2026, but since the tax rate will remain at 0% for the first five years, it will only be payable thereafter. 

Which authority is responsible for levying the taxes?

The municipality is responsible for assessing, levying and collecting the land tax and for determining whether a dwelling is vacant.

The Luxembourg Inland Revenue is responsible for setting, levying and collecting the tax on the mobilisation of land and the tax on the non-occupation of dwellings for the benefit of the state.

The Ministry of Home Affairs is responsible for setting the base value of land.

Land tax (IFON)
How will the IFON deduction work?

The abatement relates to the taxpayer's ordinary residence. Each resident owner will receive a deduction of 2,000 euros on the base value of the land parcel of his or her usual place of residence, as indicated in the municipal register of natural persons, resulting in a tax reduction of between 180 and 220 euros.

The undesired effect that the allowance reduces the land tax for certain taxpayers to zero or almost zero, although there is no objective reason to exempt them from any tax burden, is countered by two provisions. This possibility exists in particular in the case of communities of owners where the base value of a single property is divided among a large number of taxpayers, each of whom may be entitled to an abatement.

Thus, no deduction applies if it results in the base value of a property falling below 500 euros for the taxpayer concerned.

Secondly, no deduction applies if the base value for the taxpayer is below 500 euros from the outset.

What about the deduction for buildings classified as cultural heritage?

The municipal council may decide to apply an additional deduction to the base value of immovable property classified as national or municipal cultural heritage. This discount is introduced because the preservation of cultural heritage is an important objective of government policy but, in the name of public interest, may prevent the theoretically available building potential of a plot of land from being fully realised.

This discount may not be applied if it reduces the base value of a plot of land for the taxpayer concerned below 500 euros or if the base value for the taxpayer is below 500 euros from the outset.

Why are environmental zones exempt from IFON?

Traditionally, tax revenues from IFON for the approximately 360,000 plots of land in environmental zones amount to about 1.4 million euros per year, compared to total revenues of about 40.5 million euros. The administrative burden associated with calculating and collecting the tax for these plots is thus obviously disproportionate to the revenue generated.

Moreover, a calculation method that is exclusively linked to the land value and excludes buildings is likely to reduce these revenues even further. While it is obvious that a residential building in an environmental zone can have a considerable market value, this value is derived almost exclusively from the building itself and not from the land on which it stands, even though the building potential in environmental zones is in principle negligible. In the systemic logic inherent to the bill, the land value of a property in an environmental zone is therefore extremely low.

In view of the negligible revenue and the resulting disproportion to the administrative burden, taxation of land in environmental zones will therefore be abandonded.

Why does the land tax not take into account the buildings on the land?

Firstly, for the sake of terminological coherence, the draft bill remains faithful to the concept of a land tax in the strict sense of the word, i.e. the taxation of land, without falling into the logic of a more general property taxation that also takes buildings into account (as is the case, for example, with the land tax in Belgium).

Secondly, this solution is a choice made for reasons of simplification and practicability of the whole taxation system. Taxation limited to land can be linked to parameters that are relatively easy to verify, such as the building potential resulting from urban planning regulations or even the geographical location. However, there are no reliable means to determine the respective built-up area for all existing buildings, as there is currently no digitally available information on this. A list of these buildings and all future changes would therefore have to be compiled manually and individually for each plot of land. However, experience with the current land taxation system in both Luxembourg and Germany has shown the limitations of a system that requires tedious and time-consuming manual updates. This consideration is all the more important as the draft law aims to introduce a largely computerised and automated valuation model that requires a minimum of maintenance and administrative effort.

Finally, the value of a property essentially results from the value of the land, which depends in particular on its geographical location and the associated building potential, and not from the actual construction on it, except in the case of environmental zones, where this relationship is reversed.

Why is the evaluation not simply based on actual sales prices?

Alternative valuation methods and factors have been evaluated, such as a system that focuses on the sales prices of real estate, as set out in notarial deeds. Such an approach has the advantage of being based on real data that is already collected every year for statistical purposes. However, it has a decisive disadvantage, namely the lack of representativeness. It happens time and again that no land is sold in a municipality throughout the year, so that available data regularly remains incomplete or out of date. Moreover, the sales price of a plot of land in a particular location in the municipality may turn out to be very unrepresentative of the value of a plot of land in another location in the same municipality. In addition, the sales price is not based exclusively on objective criteria, but also on subjective criteria, such as the prestigious character of the location or the possible emotional attachment of the buyer to the building in question. Therefore, such an approach has been rejected.

Why does the new IFON require prior IT developments?

Based on the experience of updating the base value for several hundred thousand properties, which has proved illusory in both Luxembourg and Germany, the new system must be easily able to accommodate the inevitable fluctuations in property value with a minimum of administrative resources. Thus, the recommended system must be automated and computerised to the greatest extent possible to avoid cumbersome valuations and updates, disproportionate to the income generated.

The required tools must be able to reliably apply the parameters of the evaluation formula to all the specificities that may occur in reality, i.e. to the approximately 300,000 plots of land that are wholly or partially located in urban areas or areas designated for urban development. The use of a computerised and automated system allows for very large savings in the long run, especially in human resources, which is why the government is in favour of this approach.

Land Mobilisation Tax (IMOB)
How does the child allowance for IMOB work?

This allowance applies to the basic value of the taxpayer's undeveloped land for each of their children under the age of 25.

To avoid a situation where two parents who each have undeveloped property both receive the full allowance, which would go beyond the purpose of the allowance, the allowance is split equally between the parents in this case.

If there are several children and several undeveloped properties, the allowance applies to the undeveloped property with the highest tax rate, and so on. The allowance may never result in a negative base value. However, if the allowance is not fully absorbed because the base value cannot be reduced to zero, the balance of the allowance is transferred to the next plot for which an allowance can be granted.

Taxpayers younger than 25 years receive the same deduction. Otherwise, persons who are themselves taxpayers under 25 would be treated unequally compared to taxpayers with one or more children of the same age. In this case, the parents would no longer be able to claim the allowance for another property.

The following chart illustrates how this allowance works with a concrete example:

Tax on the non-occupation of housing (INOL)
Why introduce a national tax on the non-occupation of housing?

In times of housing shortage, the mobilisation of existing vacant housing is crucial. For example, a tax on unoccupied housing was already introduced in 2008 with the so-called “Housing Pact 1.0”. Since then, municipalities have had the option of levying a specific tax on unoccupied buildings intended for the accommodation or housing of people.

Experience has shown that this instrument has only been used by eight municipalities. In view of this, the government decided to introduce a nationwide tax on unoccupied housing. Unlike the current specific municipal tax, the collection of this annual tax will be compulsory and the tools needed to identify vacant dwellings will be introduced by the state. The aim of this tax remains to mobilise all unoccupied dwellings in order to contribute to the fight against the housing shortage.

Which dwellings are considered vacant?

Vacant dwellings are those in which there are no habitual residents registered for a period of six consecutive months.

The municipality determines the vacancy.

In addition, the municipality may also verify the non-occupation of dwellings as follows:

  • dwellings, which have a dilapidated external appearance suggesting a lack of maintenance; or
  • which are not equipped with the furniture essential for habitation; or
  • whose consumption of drinking water or energy services, as determined during a period of at least six consecutive months, is below a minimum consumption level; or
  • for which no fees are paid for public garbage collection.

Of course, landlords can give legitimate reasons why certain dwellings are temporarily unoccupied, e.g. repair, improvement, construction or alteration work necessary for the use of the dwelling.

How are “secondary residencies” or “weekend houses” treated?

Dwellings used as “secondary residencies” or “weekend houses”, who are located outside of the building perimeter, are exempt from the tax on the non-occupation of housing, as they cannot serve as primary residences.

Dwellings used as “secondary residencies” or “weekend houses”, who are located within the building perimeter, are not exempt from the tax on the non-occupation of housing, unless the taxpayer can rebut the presumption of non-occupation.

To be noted, that the notions of "secondary residencies" and "weekend houses" are not official notions.

What are the possibilities to re-occupy a vacant dwelling?

The dwelling is considered occupied again and the tax becomes void when one or more persons have their habitual residence in it and are registered in the register of natural persons. The owner can occupy the dwelling himself, make it available for residential purposes, in particular by means of an ordinary tenancy agreement or by making use of the social rent administration (GLS).

The GLS has many advantages, including a guaranteed rent, a tax exemption on the rent, care of the occupant and maintenance of the flat by a partner who has a contract with the Ministry of Housing and Spatioan Planning. The main advantage of the GLS for the owner is that a socially oriented agency takes over the renting of the property.

The social rent association in detail

Why does the municipality have to determine the vacancy of a dwelling?

The municipality is in the best position to determine the condition of unoccupied dwellings in its area and to verify on the spot the reasons given by owners for non-occupancy.

In order for municipalities to identify unoccupied dwellings, a national register of buildings and dwellings (RNBL) will be established. This register will make it possible to assign a unique identification number to each dwelling. In the future, municipalities will have to register their residents not only at an address in their area, but also in a dwelling identified by the identification number.

Unoccupied dwellings will be registered in a municipal register of unoccupied dwellings kept by the municipality.

The determination that a dwelling is unoccupied is an individual administrative decision against which the owner of the dwelling may appeal.

National register of buildings and dwellings (RNBL)
Why create a national register of buildings and dwellings?

The creation of a national register of buildings and dwellings (RNBL) represents an effective added value in many areas, be it for statistical purposes, scientific research, planning or fiscal purposes of national and local government. Currently, it is not possible to uniquely identify all buildings and dwellings within a building. This is a significant limitation for an efficient and modern management of administrative, technical or even fiscal data related to these buildings.

An example is the administration of flats that are rented out as individual rooms, the so-called “furnished rooms”. These rentals are subject to certain specific conditions related to their furnishing. The owners must register such a letting with the municipal administration and indicate the number of rooms to be let. The municipal administration checks whether the legal requirements are met. This verification is difficult for multi-unit buildings, where the municipality may not be able to identify the exact dwelling and may register occupants at an address but not in a specific dwelling.

The RNBL will thus serve to fulfil and facilitate a variety of legal and administrative tasks at both municipal and national levels. In particular, it will enable better monitoring of the implementation of the legislation on health care and the renting of (furnished) rooms, as well as the introduction of the tax on the non-occupation of housing.

The RNBL will operate along the lines of the national register of natural persons (NRPP), in close cooperation with the municipal administrations and the Land Registry and Topography Administration, which will be the state administration responsible for centralisation.

The first objective of the RNBL is to assign a unique identification number to all types of buildings and to each separate housing unit that is part of a building.

Initialisation of the national register of buildings and dwellings

How much is the tax?

In the first year, the INOL is 3,000 euros per dwelling. In the following years, the tax is increased by 900 per year up to an amount of 7,500 euros. If the flat is still unoccupied after that, this amount is due annually.

If the flat is occupied again, the tax is no longer due.

Will there be statistics on the number of unoccupied flats?


The introduction of the tax necessitates the creation of a municipal register in which the unoccupied dwellings will be recorded and which will later be transmitted to the tax authority (Luxembourg Inland Revenue). This register will also be used to produce national statistics on vacant dwellings.

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