When calculating Luxembourg taxable income, immovable assets owned by an enterprise are depreciated over their normal useful life using the straight-line method, while movable assets may be depreciated using the straight-line method or the declining-balance method if the owner is the effective user of the asset.
Effective 1 January 2017, the government introduced an optional deferral scheme, wherein deduction towards annual depreciation can be deferred/ carried forward and can be claimed anytime during the useful life of the asset. The tax authorities have clarified that the deferral scheme is applied in the same manner as the straight-line method, i.e., an asset is to be depreciated equally over the number of years of its normal useful life based on its acquisition cost minus its salvage value.
The following are the applicable rates for various asset types using the straight-line method.
|Commercial buildings||1.5% to 4%|
|Plant and machinery||10%|
When an enterprise elects to depreciate assets (non-building) using the declining-balance method, the rate used is the standard straight-line method rates multiplied by up to 3 times, as long as the resulting rate does not exceed 30%. However, in the case of equipment used exclusively for research and development, the standard straight-line method rate may be multiplied by up to 4 times as long, as the resulting rate does not exceed 40%.
A taxpayer that adopts the declining-balance method may later change to the straight-line method, but not vice versa.
Depreciable assets with a useful life of one year or less and those with a value not exceeding EUR 870 may be deducted in full from business income in the year of acquisition.
An accelerated depreciation at the rate of 4% (reduced from 6% effective 1 January 2021) applies to renovated rental real estate properties for a period of 5 years (reduced from 6 years effective 1 January 2021). However, as per a grandfathering rule the taxpayer can apply accelerated depreciation at the rate of 6% for rental real estate properties acquired/ renovated prior to 1 January 2021.