Currently, the letting and lease of immovable property is in principle VAT exempt in Belgium (some exceptions apply for specific transactions, such as financial lease agreements, the letting of parking places and warehouses,…). In a B2B context, this VAT exemption is contra productive as the owner/landlord cannot deduct any input VAT in connection with the immovable property that is rented out.
By introducing the option for VAT for letting of immovable property, the federal government has finally decided to give effect to a long-term commitment to provide an optional regime for the VAT-taxable letting of immovable property. This intention first became clear when it was included in the General Policy Statement of the Minister of Finance of 28 October 2016. In that statement, the Minister proposed to further investigate the possible introduction of an optional regime following the Dutch model.
Dutch VAT law currently permits an optional system in which the letting of immovable property can be taxed, provided that certain conditions are met. First, it is important to note that the option of taxable letting is only possible if the tenant is entitled to deduct at least 90% of the VAT chargeable on the rent. In addition, the landlord and the tenant must both confirm that they agree to exercise the option to tax. To exercise this option they can either: (i) include a written provision in the letting agreement that explicitly permits the taxation of the rent; or (ii) submit a joint request to the competent VAT authorities.
Based on the General Policy Statement of the Minister of Finance, it is likely that the Belgian legislator will draw inspiration from the Dutch model. Therefore, the application of the optional regime could be subject to similar conditions in Belgium.
Clearly the introduction of an optional regime for immovable letting will have a significant impact on the property market in Belgium. Most notably, the option to tax the letting of immovable property will allow the landlord to deduct any VAT charged over the initial purchase price of the immovable property, as well as any VAT payable on any renovation or maintenance work. This change will result in considerable savings, which should in turn result in a lower rent for the tenant.
For the time being, no official legislative documents have been drawn up. As a result, there are currently little to no details available regarding the actual conditions that will have to be met to exercise the option to tax. We expect the government to start its preparatory work on the optional system in the course of September 2017. These developments will be closely monitored by the Tiberghien VAT team and we will provide further updates and insights in this respect.
Please do not hesitate to contact us if you would like any further information.
The Tiberghien VAT team,
Stijn Vastmans (firstname.lastname@example.org)
Stein De Maeijer (email@example.com)
Gert Vranckx (firstname.lastname@example.org)
Loulou Geboers (email@example.com)
Nils Vanhassel (firstname.lastname@example.org)
Sources (only available in Dutch and French):
- Council of Ministers, 26 July 2017 (http://premier.fgov.be)
- General Policy Statement of the Minister of Finance, 28 October 2016, (http://www.dekamer.be/doc/FLWB/pdf/54/2111/54K2111013.pdf)