Tax measures relevant for the real estate sector announced for the end of this year
On Monday 9 October 2023, the Belgian Federal Government reached an agreement on the budget for financial year 2024. Said budget includes several tax measures which are relevant for the real estate sector. These measures (which are yet to be turned into law and are thus subject to change) are described below.
1. Increase of registration duties for long-term leases and rights to build
The rate of registration duties for long-term leases and rights to build will be increased from 2% to 5%.
2. 6% VAT rate for demolition and reconstruction: exclusion of the developers
As from 2021, the Government has decided to extend the 6% VAT regime for demolition and reconstruction (limited to 32 cities) to the whole Belgian tax territory, subject to specific conditions (the “temporary 6% VAT regime”). Said temporary regime will be maintained after 31 December 2023, but subject to new conditions which will render the regime obsolete for most real estate players:
- only the demolition and construction (contracting) of houses and apartments for the end user will benefit from the rate. The new regime will hence no longer apply to the sale (on plan) of houses. This condition excludes real estate developers from the 6% VAT regime;
- currently, the temporary regime can only be applied insofar as it concerns the sole own dwelling of the buyer or the principal and insofar as the total habitable area does not exceed 200m²; and
- after reconstruction, the real estate assets could be rented out, but only within the framework of social housing.
The question of whether or not these new conditions will also apply in the 32 cities which benefited from the permanent 6% VAT regime is unclear, even if the answer seems to be positive.
A transitional regime will be put in place according to which developers who applied for an environmental permit before 1 July 2023 will be able to invoice buyers of houses at 6% for works in relation to which VAT becomes due on 31 December 2024 at the latest. For projects where the environmental permit was applied for after 1 July 2023, the ability to invoice at 6% VAT will cease at the end of this year.
3. Real estate investment fund (FIIS/GVBF)
A corporate “exit tax” of 15% is due when a Belgian real estate asset enters into the FIIS/GVBF tax regime (fonds d’investissement immobilier spécialisé / gespecialiseerde vastgoedbeleggingsfondsen).
A new rule will be introduced pursuant to which if a real estate asset leaves the FIIS/GVBF tax regime less than five years after payment of the exit tax, an additional tax of 10% will have to be paid (i.e. the positive difference between the ordinary corporate income tax rate of 25% and the exit tax of 15%).
A similar rule would apply in cases where shares received after a contribution of a real estate asset into a FIIS/GVBF are sold within five years.
Through this measure, the Government apparently seeks to prevent abuses of the FIIS/GVBF tax regime.
4. Entry into force
All these measures should enter into force on 1 January 2024.
We are at your disposal to discuss the above measures further, and to help you determine how they can impact the tax position of your company.