Reduced VAT 3% Renovation in Luxembourg: Save €5,000-€10,000 on Your Works

If your renovation works cost €50,000, VAT at 3% instead of 17% saves you €7,000 directly.

Reduced VAT 3% is one of the most underestimated benefits in Luxembourg. Unlike Klimabonus which requires a complex online application, the 3% VAT applies directly to your invoice—if you meet a few simple conditions.

This guide explains exactly who qualifies, which works are eligible, and how to maximise your savings.

3% VAT: How much do you actually save?

Standard VAT in Luxembourg: 17% Reduced renovation VAT: 3%

Annual cap: Reduced VAT applies up to €50,000 of work per calendar year. Beyond that, VAT reverts to 17%.

Concrete example: Bathroom renovation (€18,000) + living room painting (€3,000) = €21,000 in 2025 → You save €2,800 with reduced VAT.

Who qualifies for 3% VAT?

You’re eligible if you meet these two conditions:

✅ 1. Owner or authorised tenant

• Owner-occupied: Yes
• Landlord: Yes
• Tenant: Yes, if you have written consent from owner
• Apartment block: Yes, for your own works

✅ 2. Existing building over 20 years old

• House built before 2005: Yes
• House built 2005 or later: No
• Listed or historic building: Yes (regardless of age)
• Rental property: Same conditions (over 20 years)

Calculation date: The construction date is that of the original building permit, not your purchase date. Check the permit year with your commune.

Important exception: Comprehensive energy renovation (insulation + heating + windows combined) may qualify for 3% VAT even on more recent buildings in certain cases. Consult your contractor.

Which works qualify for 3% VAT?

✅ ELIGIBLE for 3% VAT:

❌ NOT ELIGIBLE for 3% VAT:

Grey area: Some works need clarification. Example: is a fitted kitchen 3% or 17% VAT?

Answer: Fixed elements (worktop, integrated sink, cabinetry) = 3% VAT. Appliances (hob, oven) = 17% VAT.

Combining 3% VAT + Klimabonus: Double savings

You can apply 3% VAT AND receive Klimabonus on the same works.

Real example: Air-to-water heat pump + wall insulation

Same project with 3% VAT + Klimabonus:

Savings comparison:

• With 17% VAT alone: €25,740
• With 3% VAT + Klimabonus: €11,660
• Total savings: €14,080 (55% of cost!)

How to get 3% VAT?

Unlike Klimabonus, no administrative application needed. Here’s the simple process:

Before signing with contractor

1. Check building age Ask your commune or check your property deed. If building over 20 years old, you qualify.

2. Tell your contractor Say: “I’m eligible for 3% VAT on this renovation”

A good Luxembourg contractor knows these conditions. If they say “I don’t know what that is”, that’s a red flag.

3. Request a detailed quotation:

• Eligible vs non-eligible works (clearly separated)
• Net price (before tax)
• VAT applied (3% or 17%)
• Final price including VAT

On the invoice

4. Check the final invoice VAT applied must be 3% if all works are eligible.

Correct invoice looks like:

Bathroom renovation works
- Tiling installation (eligible 3% VAT): €5,000 net
- Plumbing (eligible 3% VAT): €3,000 net
- Labour (eligible 3% VAT): €2,000 net
Net subtotal: €10,000
VAT 3%: €300
TOTAL: €10,300

5. Keep:

• Signed quotation
• Final invoice
• Payment proof
• Before/after photos

In case of tax audit (rare), authorities may request documentation. Having clear records protects you.

Common mistakes that lose 3% VAT

❌ Mistake 1: Supplying materials yourself If you buy tiles/paint and give them to the contractor to install, only the installation may be 3% VAT, but materials stay at 17%.

Better: Ask the contractor to supply materials. Slightly higher cost but 3% VAT on everything.

❌ Mistake 2: Mixing eligible and non-eligible works without separation If invoice combines painting (eligible) + appliance (non-eligible) without distinction, authorities may refuse 3% VAT on everything.

Solution: Two separate invoices, or clearly separated net/VAT.

❌ Mistake 3: Forgetting the 20+ year rule A 2005 house is not eligible in 2025 (it’s exactly 20 years old). Check the permit date carefully.

❌ Mistake 4: Requesting 3% VAT after invoice Once invoiced at 17% VAT, you can’t change it retroactively. Clarify BEFORE signing.

Common questions about 3% VAT

Q: Can I get multiple quotations with 3% VAT to compare? A: Yes, recommended. Verify all quotes properly detail 3% VAT on eligible works.

Q: If I exceed €50,000 per year, when does 3% VAT stop? A: 3% VAT applies up to €50,000 per calendar year (1 Jan-31 Dec). Beyond that, VAT reverts to 17% on excess.

Example: €55,000 works = €50,000 at 3% + €5,000 at 17%.

Q: Can I apply 3% VAT to a second home? A: Yes, if it meets conditions (over 20 years). 3% VAT doesn’t distinguish primary vs secondary residence.

Q: Holiday rental (Airbnb, guesthouse): Does 3% VAT apply? A: Yes, if property over 20 years. Holiday rental is always considered property improvement.

Conclusion: €7,000+ you shouldn’t miss

3% VAT is simply free money if you meet two conditions:

• Property over 20 years ✓
• Eligible works ✓

No bureaucratic forms, no delays, no approval needed. Just correctly issued invoices.

On a €50,000 renovation budget, 3% vs 17% VAT = €7,000 in direct savings.

Final advice: Before contacting a contractor, check your property’s construction year. If over 20 years, mention 3% VAT in your inquiry. Good contractors know how to handle this without issue.

Ready to renovate with reduced VAT? Find experienced contractors on tack.lu and maximise your savings today.