Global Daily Tax News, Belgian VAT Change For Housing Renovations Effective, (Jun 7, 2024)

Belgium recently published in the Official Gazette legislation to implement the changes affecting the value-added tax treatment of the demolition and reconstruction of homes.

Under the measure, a six percent rate of value-added tax applies where an old house is demolished and a new one is constructed in its place.

Under prior policy, the reduced rate was available only for homes located in one of 32 urban zones. Further, property constructed by real estate developers had been specifically excluded.

This policy was later amended to prop up the industry in response to the COVID-19 pandemic. Namely, the scheme was extended nationwide but new social conditions were attached.

The Government decided that individual taxpayers were eligible providing they were rebuilding their own, only home and the living area of the new house was no more than 200 meters squared. Otherwise, both natural and legal persons were able to access the six percent rate where the property being reconstructed was to be offered for long-term rental through a social housing policy.

The VAT relief was also opened up to property sold by real estate developers, subject to adherance by the taxpayer requesting the work to the aforementioned social conditions.

The new legislative amendment is effective from June 1, 2024. It provides that the concessionary value-added tax rate will no longer apply to real estate developers' supplies. The scheme for other eligible taxpayers will remain and will be extended nationwide, with the same social conditions attached.

In October 2023, the Government confirmed certain transitional rules for existing projects. Specifically, for a further year, until December 31, 2024, the reduced rate will be available to taxpayers who have agreed the reconstruction of a home by a real estate developer, have met the aforementioned conditions, and have requested planning permission before July 1, 2023, providing the client is charged for the work by the end of 2024.

For the transitional rules to apply, work on the project must have commenced before June 1, 2024.

The legislation confirms that the reduced rate of VAT does not apply to:

• work on immovable property and other activities that do not relate to the actual home, such as building work, landscaping, and erecting fences;

• works to install swimming pools, saunas, miniature golf courses, tennis courts, and "similar installations"; and

• complete or partial cleaning of a home.