"Increasing the supply of housing!": Reform of the land tax and the mobilisation of land and housing

Reform of the land tax (IFON)

It is worth noting that the land tax in its current form is one of the oldest taxes in the Grand Duchy, and that the unit values currently used date back to 1941! The main objectives of the land tax reform are to eliminate the inequalities generated by the current IFON and to create a new evaluation model that will be more objective, transparent and fair. The reformed land tax also introduces a novelty, namely a tax reduction on the main residence, as a fixed amount for each taxpayer. It should also be noted that the future IFON will remain a municipal tax.

The Minister for Home Affairs, Taina Bofferding, is very proud of the project: "This is a great leap forward! For decades, the reform of the land tax has been debated: We have acted to make this reform a reality! I want to make it very clear that the aim of this reform is not to generate additional tax revenue, but to eliminate the fundamental injustices of the current system."

In order to allow citizens to estimate the amount of land tax they will have to pay under the planned reform, the government has set up a simulator accessible at: grondsteier-rechner.lu.

Introduction of a land mobilisation tax (IMOB)

Another challenge of this reform is the fight against the notorious housing shortage in Luxembourg. To this end, the bill introduces a tax on the mobilisation of land, whose purpose it is to encourage the effective construction of housing on the land dedicated to this end. The IMOB is an innovation and is based on the establishment of a national register of undeveloped land, which lists all land available for construction under the general development plans (PAG). A distinction is made in this regard between land that is immediately constructible, and land that requires the completion of prior roadworks and public and collective infrastructures.

"The land mobilisation tax will be calculated on the same basis as the IFON. It is unacceptable that owners do not build housing on their land, even though it is intended for this purpose, while more and more people, young people, families, can no longer afford to live in Luxembourg", emphasises Taina Bofferding.

Introduction of a national tax on the non-occupation of housing (INOL)

By introducing the INOL, complementary to the reform of the IFON and the IMOB, the government intends to mobilise existing unoccupied housing.

The municipal tax on unoccupied dwellings, introduced in 2008 on an optional basis as part of the Housing Pact 1.0, having failed to produce the expected results, will be replaced by a new compulsory national tax.

A dwelling is considered unoccupied if no natural person is registered in it for a period of six months. The municipality must establish that a dwelling is not occupied.

The INOL will be levied by the Luxembourg Inland Revenue for the benefit of the State will amount to 3.000 euros per dwelling for the first year. The tax will increase by 900 euros per year up to a maximum of 7.500 euros. If the property remains unoccupied, this amount will be due annually.

"In the face of the housing shortage, leaving homes unoccupied is a luxury we can no longer afford. Making the tax on the non-occupation of housing operational is therefore essential. This is even more justified as we have, with 30 organisations active in Social Rental Management, a system that makes it extremely simple for owners to rent out their homes. More than 1.000 housing units in Social Rental Management are proof of this", emphasised the Minister for Housing, Henri Kox, at the press conference.

Introduction of a national register of buildings and dwellings (RNBL)

The collection of the INOL requires the creation of a national register of buildings and dwellings.

The first objective of the RNBL is to assign a unique identification number to all types of buildings and to each separate dwelling within the buildings. This will enable municipalities to register their inhabitants not only at an address on their territory, but also in a dwelling identified by its national identification number. This is necessary to implement the INOL.

In addition, the RNBL provides effective added value in many areas of administration for the benefit of citizens, whether for statistical or tax purposes, for scientific research or for planning purposes, by making it possible to identify buildings and dwellings with rigour and precision.

Thus, it is indispensable for improving the necessary transparency of the national building stock, which is still lacking today. In particular, the RNBL will make it possible to better support the implementation of the legislation on sanitation and the letting of (furnished) rooms.

Yuriko Backes, Minister of Finance, comments: "The measures we are proposing today form a coherent and comprehensive package. The land tax will be reformed to make it more modern and fair. The aim is not to create an additional tax burden for citizens and companies, which in times of crisis and inflation would not be desirable. This tax will be supplemented by a new land mobilisation tax and a tax on the non-occupation of dwellings. The primary objective of this measure is to put a serious brake on speculation and the growth of property prices, in order to increase supply, not to generate additional revenue."

Press release by the Ministry of Home Affairs, Ministry of Housing, the Ministry of Finance