Introduction

The Luxembourg société civile immobilière (SCI) continues in 2025 to be a favoured vehicle for the acquisition, holding and inter-generational transmission of real estate. Its attraction lies in the combination of contractual flexibility—drawn from general civil-law principles—and tax transparency, which allows profits to be taxed only in the hands of the partners. The structure is therefore widely used by families, private investors and joint-venture participants that wish to centralise asset management while allocating beneficial ownership among several parties.

Legal Nature and Constitutive Features

An SCI is a civil company mainly governed by the Civil Code. It must pursue a purpose that is civil in nature, such as owning, administering or letting real estate.

Regular property trading or development can prompt the tax authorities to requalify the entity as commercial. Legal personality arises upon registration with the Trade and Companies Register (RCS); since 2017 such registration has been compulsory for all civil companies with legal personality. At least two partners—individuals or legal entities, resident or non-resident—are required. Contributions may be made in cash, in kind (including real estate) or in industry, and there is no statutory minimum capital. The shares (parts sociales) are normally nominative and their transfer usually requires unanimous partner consent.

Formation Process

The constitutive deed may be executed privately, yet a notarial instrument is mandatory where Luxembourg real estate is contributed or purchased on formation. Registration with the RCS entails filing the articles, details of the managers (gérants) and ancillary information, and paying the prevailing fee. Within one month of incorporation, ultimate beneficial owners (those holding at least 25 % or exercising effective control) must be recorded in the Register of Beneficial Owners (RBE). Since 12 November 2024 any natural person whose data appear in an RCS filing must provide a Luxembourg national identification number.

Governance, Liability and Record-Keeping

Day-to-day administration is entrusted to one or more managers acting within the limits laid down in the articles (incorporation deed). Unless otherwise provided, unanimous consent is required for key matters such as amendments to the articles, admission of new partners, capital changes or property disposals. Partners are indefinitely and jointly liable vis-à-vis third parties, but only in proportion to their participation; creditors must first seek payment from the SCI itself. Although civil companies are not obliged to file annual accounts with the RCS, they must maintain orderly books and produce financial statements when requested by banks or the tax authorities.

Anti-money-laundering legislation applies to real-estate transactions. Notaries, banks and professional managers must conduct customer due-diligence and the SCI must keep its partner register current.

Tax Treatment in 2025

Direct Taxes

Provided its activity remains civil, the SCI is fiscally transparent and not subject to corporate income tax (CIT), municipal business tax (MBT) or net wealth tax (NWT). Income and gains are taxed directly in the hands of the partners. If the entity is requalified as commercial—for example by engaging in property development or systematic short-term furnished rentals with services—it becomes liable to the corporate regime. From tax year 2025 the headline CIT rate has fallen to 16 %, and with the 7 % solidarity surcharge and 6.75 % MBT the combined effective rate in Luxembourg City is 23.87 %.

VAT

Leasing of unfurnished residential property remains exempt from VAT, with no recovery of input tax on related costs. Letting of commercial premises is in principle exempt, but landlord and tenant may opt to apply 17 % VAT by joint request, allowing input tax recovery on renovation or construction expenses. Short-term furnished accommodation that includes hotel-style services constitutes a taxable supply, generally at the super-reduced 3 % rate applicable to hotel stays; where ancillary services predominate the standard rate applies.

Local Taxes and Duties

• Property tax (impôt foncier): Payable annually to the municipality based on the unitary value of the property. A structural reform is slated to enter into force progressively from 2026; until then, the historic rates apply.
• Communal taxes: Municipalities can levy waste collection or frontage taxes that the SCI must settle.

Acquisition, Financing, and Transfer Duties

An SCI’s purchase of Luxembourg real estate triggers registration duty of 6 % and transcription duty of 1 %. A municipal surcharge of 3 % applies in Luxembourg City and certain other communes, bringing the headline cost to 10 % of the price.

Transfers of SCI shares are usually effected by private deed and are not automatically subject to proportional transfer duties. A deed that is voluntarily registered or notarised attracts a fixed duty of EUR 75. Anti-abuse provisions empower the tax administration to treat artificial share transfers as transfers of real property.

SCIs may finance acquisitions with bank loans or partner loans. Interest payable at arm’s-length rates is deductible at the SCI level and taxable in the lender’s hands. No Luxembourg withholding tax is levied on interest paid to non-resident lenders, subject to the usual treaty considerations.

Advantages of an SCI

The SCI separates property ownership from the partners’ personal estates and allows flexible allocation of rights such as usufruct and bare ownership. Tax transparency eliminates economic double taxation and lets each partner optimise deductions individually. Governance can be customised by contract without the mandatory bodies applicable to commercial companies. Financing options include shareholder loans and traditional mortgage lending.

Alternatives to Consider

Where limited liability or a broader investment strategy is required, a fully taxable holding company (SOPARFI) or a special limited partnership (SCSp) may be preferable. A société de gestion de patrimoine familial (SPF) cannot hold real estate directly.

Conclusion

In 2025 the Luxembourg SCI remains the principal civil-law vehicle for collective real-estate ownership. Correct drafting of articles and partner agreements, strict adherence to AML and registration requirements, and regular monitoring of activity to ensure the enterprise remains civil in nature are essential to preserving tax transparency and limiting unforeseen liabilities. Acquisition costs—about 10 % of the purchase price, albeit mitigated for primary residences by the enlarged Bëllegen Akt—must be budgeted, and partners should anticipate annual taxation on rental income and eventual capital gains. With these parameters in view, the SCI continues to offer a robust and adaptable framework for real-estate investment and succession planning in Luxembourg.