Private buy-to-let investors have largely stayed away from Luxembourg's new-build market since interest rates rose. The July 2026 housing package tries to bring them back with a new accelerated depreciation regime, presented as the "three times six" principle.
The principle
- 6% depreciation per year
- for 6 years
- on a depreciation base capped at €600,000 per building
Depreciation (amortissement) is a deductible expense against rental income. It does not cost the investor cash, but it reduces the taxable result — and therefore the tax bill.
Standard depreciation for residential buildings is 2% a year (3% for buildings completed more than 60 years ago). A 6% rate front-loads the deduction into the first years, when financing costs are highest.
A worked example
An investor buys a new rental apartment. The depreciable base (building part, excluding land) is €500,000.
- Annual depreciation at 6%: €30,000
- Over six years: €180,000
- At a marginal tax rate of around 40%, the tax effect is roughly €12,000 per year
With standard 2% depreciation, the same base gives €10,000 a year. The difference — €20,000 of additional deduction each year — is what makes the regime attractive.
If the base were €800,000, the deduction would be limited to 6% of €600,000, i.e. €36,000 a year.
Effect on yield
Gross rental yields on new apartments in Luxembourg are modest. The regime does not change the rent, but it changes the after-tax return in the first six years. For many investors, that is the difference between a project that is cash-flow negative after tax and one that roughly breaks even.
In practice, this matters most for:
- investors with a high marginal tax rate
- projects where the building share of the price is high (typical for apartments)
- investors who finance a large part of the purchase and have significant interest costs
Effect on valuation
A tax incentive granted to the first investor does not automatically transfer to a later buyer. A valuer will therefore look at:
- the market rent and a realistic yield
- whether the property still qualifies for the regime in the hands of a buyer
- the remaining period of accelerated depreciation
For a resale during or after the six-year window, the incentive may be worth little or nothing to the next owner. Do not assume it will be reflected in the sale price.
Remember the recapture on sale
Depreciation reduces the tax base during ownership, but it also reduces the acquisition cost used to calculate the capital gain when you sell. A higher depreciation today can mean a higher taxable gain later. Since July 2025, a sale within five years is taxed as a speculative gain at the full rate — something to plan for if you might sell early. See our capital gains guide.
Open questions
At the time of writing, the regime has been announced but its final conditions are not yet published. Investors should wait for answers on:
- which buildings qualify (new builds only, VEFA, renovations?)
- whether rental conditions (rent level, duration) apply
- the start date and transitional rules
- how the €600,000 cap applies to buildings with several units
Until the law is voted, base your investment decision on the standard rules and treat the "3×6" regime as upside.
Next step
Before buying a rental property, a professional valuation tells you whether the purchase price is consistent with market rents and yields — independently of any tax benefit. Request a no-obligation quote.