Luxembourg real estate investment in France has become complex

The successive amendments to the tax treaty between France and Luxembourg (protocols of 2014 and 2018, the latter applicable since 2020) call into question the attractiveness of France.

This change of framework has not diminished Luxembourg's appetite for European real estate investment.

The case for investing in France must now be reviewed in light of three points:

• Anti-abuse clauses in the bilateral tax treaty limit its benefits;
• Tax rulings are granted more rarely by the Luxembourg administration;
• The French SCI is a new structuring scheme for real estate investment.

I. The SIF (specialised investment fund) / OPCI (real estate collective investment undertaking) structure is no longer relevant

The tax treaty has put an end to this practice where the Luxembourg shareholder held at least 10% of the capital of the OPCI.

For more information:

https://www.wort.lu/fr/economie/l-investissement-immobilier-touche-par-la-convention-fiscale-avec-la-france-5ab60d3fc1097cee25b85caa

II. The French SCI held by a Luxembourg company (SA, SARL, SAS...)

In this case, the investor must now let go of the idea of symbolic taxation in the current political and legal environment.

Taxation of property income and capital gains on the sale of assets will take place in France. The tax treaty, which recognises SCIs as resident, also imposes Luxembourg taxation, which should normally be eliminated by a credit against Luxembourg tax equal to the French tax.

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Maître Saliha DEKHAR

Étude SD LAW – Luxembourg