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Extension of the 6% VAT on Residential Demolitions and Reconstructions

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Belgium

The content of the draft program law concerning Belgium's 2021 budget has been released by the Belgian government. This draft includes several tax measures out of which one is of particular relevance for the real estate sector: the extension of the 6% VAT rate for demolitions followed by reconstructions of private residences. 

With this extension, the Belgian government wishes to stimulate the renewal of Belgian residential market and to support the Belgian real estate sector.  

Currently, this reduced rate is limited to demolitions followed by reconstructions carried out in 32 Belgian urban centres (e.g. Antwerp, Liège, Ghent). According to the draft program law, the eligibility to this reduced rate will be extended to the entire Belgian territory. 

Further to this extension, demolition/reconstruction projects from private individuals as well as from real estate developers ("promoteurs immobiliers"/"vastgoedontwikkelaars") will be eligible to this regime. Additionally, the reduced rate will also be available for demolition/reconstructions of private residences leased by "social real estate agencies" during a minimum of 15 years. 

The possibility to benefit from the 6% VAT rate will be subject to several conditions:

•    The project owner ("maître d'ouvrage"/"bouwheer") is a private individual; 

•    The project concerns the demolition and reconstruction of a residence where the project owner will "immediately" establish his/her domicile during the five years following its first occupation; 

•    Unfortunately, the extension of the 6% VAT rate will be temporary: only the VAT payable operations from 1 January 2021 until 31 December 2022 should be eligible to the reduced rate;  

•    The residence cannot exceed a maximum habitable surface of 200m² during the five years following its first occupation by the project owner. 

It seems that this last condition was added in order to limit the entitlement of the reduced VAT rate to "social" real estate projects. However, in its current wording this condition seems questionable as no distinction is made regarding the type of construction. Indeed, whereas a 200-m² ceiling for houses seems defendable based on that rationale, we do not directly see the "social character" when it comes to apartments with the same surface.   

For works relating to projects where VAT is payable before 1 January 2021, the reduced rate may still apply to invoices issued between that date and 31 December 2022, provided that it is timely opted for that regime. (by 31 March 2021 at the latest).

As the related draft program law is currently being reviewed by the Council of State and is still subject to parliamentary debates, it may be (partially) amended or withdrawn. 

In case of questions, please do not hesitate to Geoffroy Galéa and Alain Thilmany
 

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