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Quick overview of Belgian Real Estate

QUICK OVERVIEW OF BELGIAN REAL ESTATE

Preliminary remarks

This guide was updated 31 December 2019 and cannot be considered as being an exhaustive and detailed list of applicable measures to Real Estate transactions.

Rental income and capital gains of Belgian real estate

Taxpayer

Basis of tax

Tax levied

Tax rates (2020)

Resident individual

 

 

Non-resident individual

 

 

Resident company

 

 

Non-Resident company

 

Rental income

Capital gains

 

Rental income

Capital gains

 

Rental income

Capital gains

 

Rental income

Capital gains

Personal income tax

 

 

Personal income tax

 

 

Corporate income tax

Corporate income tax

 

Corporate income tax

Corporate income tax

*Cadastral income/Net income

Not applicable

 

Cadastral income/Net income

Not applicable

 

Up to 29.58% (25% as of FY2020)

Up to 29.58% (25% as of FY2020)

 

Up to 29.58% (25% as of FY2020)

Up to 29.58% (25% as of FY2020)

*The cadastral income is the (theoretical) average net income that the real estate property should produce in one year

Rental income

Individuals

Introduction

Taxation of rental income depends on the use of the property: private habitation or professional purposes.

Liability to tax

Rental income received by individuals is subject to personal income tax (“impôts des personnes physiques”/”personenbelasting”).

Basis to tax

When the real estate is rented to an individual who uses the property for private habitation purposes, rental income is taxed on the basis of the indexed cadastral income (“revenu cadastral”/”kadastraal inkomen”) increased by 40%. The cadastral income is determined by the Belgian government and is estimated as the “normal” net annual income of any property.

When the real estate is rented to an individual who uses the property for professional purposes (e.g. the premises is rented for business purposes) or rented to companies, the taxable income is the gross income decreased with fixed costs equal to 40% of the rental income (with a minimum threshold amounting to the cadastral income increased by 40%).

Taxable basis for non-furnished buildings (not land) rented out for professional reasons:

  • Indexed NRV, increased with 40%
  • + Rental excess;

Rental excess: gross rental income - lump sum costs with a maximum of 40%.

Lump sum costs cannot be higher than 2/3 of the non-indexed, revalorised NRV.

Companies

Introduction

As a general rule, a Belgian resident company is liable to corporate income tax (under Belgian tax law, accounting law supersedes tax law unless otherwise expressly provided by tax law. As a result, the taxable base of a resident company is calculated on the basis of its annual accounts) on its worldwide income, including income derived from real estate. This also includes tax disallowed expenses and distributed dividends.

Liability to tax

Rental income earned by companies is subject to corporate income tax.

Basis to tax

Income is taxed at the standard corporate income tax rate of 29.58% (25% as of 1 January 2020). Under certain conditions (amongst others – being a SME), a reduced corporate income tax rate of 20.40% (20% as of 1 January 2020) may apply on the first EUR 100,000 of income.

Capital gains

Individuals

Introduction

As a general rule, capital gains realised by individuals on real estate are in principle not subject to personal income tax, but are taxed at a flat rate (0%, 16.5% or 33%) depending on the elapsed time between the acquisition of the property and the realisation of the capital gains and the type of property.

Liability to tax

Capital gains realised by individuals may be subject to personal income tax under specific circumstances (a certain level of labour or entrepreneurial activities): in that case, up to 50% progressive tax rates for professional activity versus separate fixed tax rate in case of non-professional activity.

Basis of tax

Capital gains realised on real estate is subject to personal income tax if real estate is sold within 5 years after being acquired. If this is the case, capital gains are subject to personal income tax at a flat rate of 16.5%.

Capital gains realised on a building plot are subject to personal income tax at a rate of either 16.5% or 33% depending on the elapsed time between the acquisition of the real estate and the realisation of the capital gains (sold within 5 years after being acquired or between 5 and 8 years after being acquired).

These rules are not applicable for building plots on which buildings are erected nor in case of acquisition through inheritance or donation.

 Companies

Introduction

As a general rule, a Belgian resident company is liable to corporate income tax on its total worldwide income, including capital gains realised on real estate.

Liability to tax

Capital gains realised on real estate are subject to corporate income tax.

Basis to tax

Capital gains are taxed against the standard corporate income tax rate of 29.58% (25% as of 1 January 2020). Under certain conditions (amongst others – being a SME), a reduced corporate income tax rate of 20.40% (20% as of 1 January 2020) may apply on the first EUR 100,000 of income.

Exemptions

Provided that certain conditions are met, companies may benefit from a tax deferral regime ("taxation étalée des plus-values"l"gespreide belasting op meerwaarden")  (Note that individuals may also benefit from this regime on capital gains realised on real estate used for business purposes). This regime allows the seller to spread the tax charge following the depreciation period of the newly acquired asset by way of reinvestment of the sale price of the asset on which the capital gains have been realised.

 

Belgian VAT & transfer taxes

Taxpayer

Basis of tax

Tax levied

Tax rates (2020)

Resident individual

 

 

Non-Resident individual

 

 

Resident company

 

 

Non-resident company

 

Rental income

Transfer of ownership

 

Rental income

Transfer of ownership

 

Rental income

Transfer of ownership

 

Rental income

Transfer of ownership

VAT exempt

Registration duties

 

VAT exempt

Registration duties

 

VAT exempt

Registration duties

 

VAT exempt

Registration duties

NA

6% to 12,5% (without discounts)
NA

6% to 12,5% (without discounts)
NA

12.5% or 10%

 

NA

12.5% or 10%

 

Value-Added Tax (VAT)

Individuals

Introduction

Value-added tax is a tax based on consumption. VAT is levied at each stage of the supply chain.

Liability to tax

If an individual performs commercial or professional activities in Belgium on a recurrent basis on which VAT is due, he/she is a taxable person and should register for VAT.

Basis of tax

As a rule, the purchase, sale, and renting of real estate located in Belgium is in principle exempt from VAT. However, purchase or sale of real estate qualifying as “new building” may be subject to VAT. For VAT purposes, a building is deemed to be “new” until 31 December of the second year following the year during which the building was occupied for the first time.

Interaction with transfer tax

Consequently, when the sale of real estate is VAT exempt, registration duties will apply. In case VAT is charged because a newly created building is sold within two years following its first occupancy and the seller has opted for VAT or is a professional real estate company, the transfer will be taxed with 21% VAT.

Since 1 January 2019, it is possible to opt for VAT when renting or leasing a building built from 01 October 2018 (or significantly renovated) in B2B situations. Both the lessor and the lessee will have to agree that VAT will apply on the rent. In that case the lessor will charge VAT on the rent and can deduct the VAT on the purchase or construction of the building.

The lessor will have to register for VAT and charge VAT to the lessee. The lessee can deduct this VAT on the rent if he uses it for VAT taxable activities (VAT revision period for real estate is, in this case, 25 years).

Companies

The same rules as for individuals apply.

Transfer Taxes

Individuals

Introduction

Registration duty (“droit d’enregistrement”/”registratierecht”) is a tax on the transfer of real estate from one person or company to another.

Liability to tax

Unless VAT applies, the sale of Belgian real estate is subject to the transfer tax on real estate, due by the purchaser. 

Basis of tax

As a rule, the sale in full ownership will be subject to a 10% (Flemish region) or 12.5% (Walloon and Brussels region) registration duty depending on the region in which the real estate is located. The registration duty is in principle calculated on the contractual transfer value of the real estate or its market value, whichever is higher. 

Exemptions

Various reduced rates apply depending on the region in which the real estate is located (e.g., the acquisition by professional real estate or the purchase by individuals of small dwelling for which the cadastral income does not exceed a given threshold).

Companies

The same rules as for individuals apply. However, note that under certain conditions contribution of real estate to a Belgian company is not subject to registration duties except if the real estate is used for private habitation purposes. Specific rules apply to the transfer of real estate in case companies are in business restructuring.

 

Local taxes

Taxpayer

Basis of tax

Tax levied

Tax rates

Resident individual

 

Non-Resident individual

 

Resident company

 

Non-resident company

Cadastral income

 

Cadastral income

 

Cadastral income

 

Cadastral income

 

Regional tax

 

Regional tax

 

Regional tax

 

Regional tax

1.25% or 2.5% (without significant local taxes)

1.25% or 2.5% (without significant local taxes)

1.25% or 2.5%

1.25% or 2.5%

 

Individuals

Introduction

Regions levy an annual real estate tax ("précompte immobilier"l"onroerende voorheffing") on real estate located in Belgium.

Liability to tax

The annual real estate tax levied annually by the regions by way of assessment is due in the hands of the owner, usufructuary or beneficiary of other rights in rem.

Basis of tax

The real estate tax is based on a percentage of the indexed cadastral income. The applicable percentage depends on the region in which the real estate is located (1.25% in Walloon and Brussels regions and 2.5% in the Flemish region). Besides the regional real estate tax, significant additional local taxes are levied by provinces and municipalities.

Exemptions

Various reduced rates and exemptions can apply depending on the region in which the real estate is located.

Companies

The same rules as for individuals apply. However, note that the real estate tax is deductible for tax purposes as a business expense.

Vehicles for Belgian real estate

Commonly used vehicles for Belgian real estate

The public limited company ("société anonyme"l"naamloze vennootschap") and the private limited liability company ("Société a responsabilité limitée"/"Besloten Venootschap") are the most commonly used unregulated vehicles for Belgian real estate.

All income earned by a Belgian company is subject to corporate income tax up to 29.58% (25% as of 1 January 2020). Distributed dividends are subject, in principle, to a 30% withholding tax. Specific withholding tax exemptions and/or reductions based on domestic law and the EU Interest and Royalties Directive/double tax treaties may apply provided that certain conditions are met.

Note that a major reform of the Belgian Companies Code has been adopted during the year 2019. The new Code of Companies and Associations will simplify the existing legal framework, abolish the distinction between civil and commercial companies and tend to introduce flexible, simple and predictable companies and associations law.

Partnership & joint ventures

For Belgian tax purposes, there is no distinction between the taxation of partnerships and joint ventures.

Partnerships & joint ventures in Belgium may take various forms (purely contractual or a form of a company). It should be noted that there is no specific legislation in Belgium for joint ventures. For example, contractual joint ventures can refer (i) to General partnership (so-called in Belgium "société simple / Burgelijke vennootschap") - without separate legal personality. The general principles of company law will be applicable for corporate vehicles without a separate legal personality. Benefits and losses will be directly allocated to the partners. Joint Ventures can also take the form of a

(ii) company with limited liability of its shareholders. At this regard, these companies are subject to Belgian corporate income tax like other Belgian companies.

Transparent partnerships

Partnerships can be structured as tax transparent entities. The profits and losses will hereby be allocated directly to the partners. This structure avoids multiple-level taxation. Example of the transparent vehicle is the European Economic Interest Group ("Groupement Européen d'lnteret Economique"/ "Europees economisch samenwerkingsverband").

Trust
The concept of Trust is not known under Belgian law. However, Belgium has implemented a so-called “Cayman tax”; this tax is a set of rules in order to tax by transparency the income of the Trust (only the “Settlor” is taxable). Moreover, in principle, distributions made by the Trust to a Belgian resident are qualified as dividend and taxed as such.

Specific real estate vehicles

Regulated Real Estate Company (RREC)

The Regulated Real Estate Company (“Société Immobilière Règlementée”/ ”Gereglementeerde Vastgoedvennootschap”) is defined as a company incorporated for an undefined period of time whose main activity is to make buildings available to users, either directly or through a company in which it holds share participation. The REEC is subject to the supervision of the Financial Services and Markets Authority (“FSMA”).

The RREC must be incorporated under the corporate form of a public limited company or a limited partnership by shares (“société en commandite par actions”/”commanditaire vennootschap op aandelen”), and have a minimum share capital of EUR 1,200,000.

Under Belgian law, the REEC must invest a maximum of 20% of its consolidated assets in real estate properties which form a single real estate complex. Also, an assessment of its property assets on a quarterly basis by valuation experts is required. Furthermore, the REEC is subject to a yearly distribution obligation of at least 80% of the corrected profit.

From a corporate income tax point of view, provided that certain conditions are met, the RREC is entitled to benefit from specific rules, including an exemption from corporate income tax (except on disallowed expenses for tax purposes and abnormal or benevolent benefits) and from a reduced withholding tax rate.

Specialised Real Estate Investment Fund (SREIF)

The Specialised Real Estate Investment Fund (“Fonds d’Investissement Immobilier Spécialisé”/”Gespecialiseerd Vastgoedbeleggingsfonds”) is a closed-end non-transparent fund, incorporated for a limited period of 10 years with extension possibility, whose main activity is to collectively invest in real estate (broadly defined) for institutional and professional investors. Unlike the RREC, the SREIF itself is not subject to supervision of the Financial Services and Markets Authority, but only a registration with the Ministry of Finance is required. However, the Belgian Ministry of Finance is competent to monitor the respect of the legal obligations of the FIIS.

As the RREC, the SREIF is subject to a yearly distribution obligation of at least 80% of its corrected profit. With respect to accounts, the SREIF must draw its financial statement under IFRS standards.

Similar to the regime applicable to the RREC, the SREIF benefits from a specific corporate income tax regime both in the hands of the SREIF and in the hands of the investors. From a corporate income tax point of view, provided that certain conditions are met, the SREIF is entitled to benefit from specific rules, including an exemption from corporate income tax (except on disallowed expenses for tax purposes and abnormal or benevolent benefits) and from a reduced withholding tax rate.

 

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