Investments in real estate in Belgium can be carried out via a direct acquisition from abroad, a direct acquisition from abroad through a local permanent establishment or an indirect acquisition through a local company.
Several types of corporate vehicles can be used for investment in real estate in Belgium by an indirect acquisition through a local company. A closed limited liability company (besloten vennootschap, BV/société à responsabilité limitee, SRL) and a public limited liability company (naamloze vennootschap, NV/société anonyme, SA) are the most commonly used.
Last modified 22 Mar 2024
The sale of shares in a company holding real estate will normally not be considered to be a sale of the real estate itself. No transfer tax (VAT or registration duties) is therefore due. Existing anti-abuse rules should, as a general rule, not affect share purchases. Exceptionally, certain share deal structures could possibly fall within the scope of these measures.
The transfer of ownership or the disposal of real estate interests in Belgium is either subject to registration duties or to VAT. These two taxes do not apply cumulatively.
A 12.5% registration duty is generally payable by the buyer and calculated on the basis of the contractual price or the market value, whichever is higher. From 2022, a distinction is made in the Flemish region between the purchase of the only owner-occupied home (where the registration duty is reduced from 6% to 3%) and the purchase of a home other than the only owner-occupied home (where the registration duty is increased from 10% to 12%. Reduced rates and exemptions may apply in function of the nature of the buyer and the type or size of the property.
A reduced rate (4% in the Flemish region, 5% in the Walloon region and 8% in the Brussels region) is available for professional buyers provided that certain conditions are met, among which the obligation to buy and sell a number of properties within a certain period of time.
Restitution of paid registration duties can be obtained if a property is re-sold within two years as from the signature of the notarial deed of acquisition. The amount to be recovered depends on the region where the property is located, (36% in the Brussels region and 60% in the Flemish and the Walloon Region).
Where a company finances the purchase by a loan, a mortgage may be created over the property. The following indirect taxes are payable upon the registration of a mortgage:
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The acquisition of new buildings is subject to VAT (generally at 21%). A building is considered to be new for VAT purposes until 31 December of the second year following the year the building was first put to use. In some cases, old buildings that have been thoroughly renovated can be regarded as new buildings for VAT purposes.
The purchase of land belonging to a new building is subject to the same VAT treatment as the purchase of the new building, if that land and the new building are sold simultaneously by one and the same person. No VAT is due on the part of the price attributable to the land if these conditions are not met. Registration duties will then be due on the part of the price attributable to the land.
The VAT regime applies to sales, the grant of rights in rem (that is rights over the real estate itself rather than rights enforceable only against the owner) or financial leases of new buildings where certain conditions are met.
In such cases the seller will be entitled to recover the VAT paid on the goods and services used in carrying out these transactions, either wholly or partially (ie any VAT charged or due on the acquisition or construction of the building).
VAT will apply if the seller is a professional developer carrying out his business, or a taxpayer or private individual who has opted for VAT to apply to the sale of the (new) building. The buyer has no choice in this respect.
The buyer is entitled to recover VAT paid if he uses the new building in the context of activities subject to VAT. If the building is put to personal use or used for VAT exempt supplies of goods or services (such as the supply of real estate not subject to VAT or VAT exempt supplies of services in connection with real estate) the VAT charged is in principle not deductible.
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Costs include the fees of professional advisors and some documentary duties. A notary’s fee is payable by the buyer on the transfer value of real estate at rates ranging from 0.057% to 4.56%. These fees are subject to VAT at a rate of 21%.
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Immovable withholding tax on real estate amounts to 1.25% (in Brussels and Wallonia) or 3.97% (in Flanders) of the deemed rental income (revenu cadastral/kadastraal inkomen) attributed to the property, as indexed on 1 January of the relevant tax assessment year.
Additional provincial and municipal surcharges are levied on top of the (regional) immovable withholding tax, which may increase the effective tax rate to around 30% to 50% of the cadastral income, depending on the province and municipality where the real estate is located.
Belgian immovable ‘withholding’ tax is not refundable and cannot be credited against corporate tax. However, it is fully deductible as a business expense from a company’s taxable income.
For companies using or exploiting real estate, taxable income is determined on the basis of the accounting profit or loss realized.
The taxable income can be reduced by deducting the expenses associated with the real estate, such as the depreciation of buildings (depreciation of land is not possible), repairs, maintenance, renovation and similar costs, and interest on loans taken out to finance the acquisition of the real estate (with some limitations). In certain cases the company is also entitled to a deduction of an extra depreciation in the year of acquisition of a new building (investment tax deduction).
Corporate income tax , advance payments and withholding tax on income included in the tax base, are not deductible. This is also the case for interest on late payments, fines and any associated prosecution expenses.
Generally, taxes, fees and public service charges payable to the regions, as well as surcharges, penalties and other similar charges, are not deductible, but immovable withholding tax, registration duties on the transfer of the real estate and mortgage duties are tax deductible.
Capital gains from the sale of property (buildings as well as land) are subject to normal corporation tax. However, a system of deferred and spread taxation applies where the property sold was held for at least 5 years and the proceeds are entirely reinvested within three to five years in depreciable intangible or tangible fixed assets used for business purposes in Belgium or in any other member state of the European Economic Area (EEA). Losses related to real estate can be offset against other income. Tax losses may be carried forward indefinitely but their use in a given tax year is limited to €1 million plus 40% of the taxable basis in excess of €1 million. Any carried-forward tax losses that cannot be used due to this limitation may be further carried forward indefinitely.
Resident companies are subject to a standard corporate income tax rate of 25%. The first income band of €100,000 of small companies is subject to a lower rate of 20% (subject to certain conditions).
There are a number of local taxes imposed by the regions, provinces and communes that are linked to the real estate itself or to the use of the real estate.
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Not applicable.
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Typically, rental income from letting out premises. In addition capital gains might accrue on the sale of the property.
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The taxes relating to income derived from real estate located in Belgium are as follows:
Immovable withholding tax on real estate amounts to 1.25% (in Brussels or Wallonia) or 3.97% (in Flanders) of the deemed rental income (revenu cadastral/kadastraal inkomen) attributed to the property, as indexed on 1 January of the relevant tax assessment year.
Additional provincial and municipal surcharges are levied on top of the (regional) immovable withholding tax, which may increase the effective tax rate to around 30% to 50% of the cadastral income, depending on the province and municipality where the real estate is located.
Belgian immovable withholding tax is not refundable and cannot be credited against corporate tax. However, it is fully deductible from a company’s taxable income.
For companies using or exploiting real estate, taxable income is determined on the basis of the accounting profit or loss realized.
The taxable income can be reduced by deducting the expenses associated with the real estate, such as the depreciation of buildings (depreciation of land is not possible), repairs, maintenance, renovation and similar costs, and interest on loans taken out to finance the acquisition of the real estate (with some limitations). In certain cases the company is also entitled to a deduction of an extra depreciation in the year of acquisition of a new building (investment tax deduction)
Corporate income tax, advance payments and withholding tax on income included in the tax base, are not deductible. This is also the case with interest on late payments, fines and any associated prosecution expenses.
Generally, taxes, fees and public service charges payable to the regions, as well as surcharges, penalties and other similar charges, are not deductible, but immovable withholding tax, registration duties on the transfer of the real estate and mortgage duties are tax deductible.
Capital gains from the sale of property (buildings as well as land) are subject to normal corporation tax. However, a system of deferred and spread taxation applies where the property sold was held for at least 5 years and the proceeds are entirely reinvested within three to five years in depreciable intangible or tangible fixed assets used for business purposes in Belgium or in any other member state of the European Economic Area (EEA). Losses related to real estate can be offset against other income. Tax losses may be carried forward indefinitely, but their use in a given tax year is limited to €1 million plus 40% of the taxable basis in excess of €1 million. Any carried-forward tax losses that cannot be used due to this limitation may be further carried forward indefinitely.
Resident companies are subject to a standard corporate income tax rate of 25%. The first income band of €100,000 of small companies is subject to a lower rate of 20% (subject to certain conditions).
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As a general rule, dividends paid by Belgian companies to corporate entities are subject to a 30% withholding tax.
Under the EU Parent-Subsidiary Directive, as implemented in Belgium, no withholding tax is payable on dividends paid by a Belgian company to another EU company, provided that:
This regime also applies to dividends paid by a Belgian company to a parent company resident in a country with which Belgium has signed a bilateral tax treaty or any other agreement which provides for the exchange of information between the two countries.
Where the minimum holding period of 12 months has not yet expired, the distributor of the dividends must provisionally retain the withholding tax theoretically due on the dividends and the beneficiary must sign a declaration that the participation will be held for at least 12 months. If the beneficiary does not comply with this declaration, the withholding tax must be paid to the tax authorities. If the declaration is complied with, the amount withheld can be paid to the shareholder.
The withholding tax rate may also be reduced under an applicable double-taxation treaty if the dividends are paid to foreign companies that are resident of a treaty state, or also under domestic legal provisions in some cases. Domestic law also provides for reduced rates in specific circumstances (eg 15% on dividends distributed by regulated real estate companies (B-REITs) and specialized real estate investment funds (B-REIFs) that invest at least 80% of their real estate directly or indirectly in immovable property located in the EEA that is exclusively or mainly used or destined for residential care units adapted to healthcare).
Domestic law provides for reduced withholding tax rates which may apply to the distribution to individuals of dividends (other than share buybacks or liquidation dividends) related to newly registered shares that were issued after 1 July 2013. These rates apply provided that the following conditions are satisfied:
The reduced withholding tax rates will only apply to dividends paid out at the time of the profit distribution related to the second financial year following that of the contribution. Any such dividend distributions will be subject to a 20% withholding tax. Dividend distributions paid out at the time of the profit distribution related to the third or subsequent financial years following the financial year of the contribution, will be subject to a 15% withholding tax.
A company is ‘small’, if it stays below at least two of the following three thresholds during two consecutive financial years:
In the case of a group of affiliated companies (eg a holding company with operating subsidiaries), the above criteria must be applied to the group as a whole. A parent company may opt to apply the 'simplified method', whereby the totals of annual turnover and balance sheet of all the related companies for assessment purposes are added up. The thresholds of annual turnover and total balance sheet are then increased by 20%.
Small companies may set up a liquidation reserve in order to be able to distribute dividends at a reduced rate. Such a reserve can be formed through the attribution of (part of) the profits after tax to a liquidation reserve. This attribution is subject to a separately assessed tax of 10% at company level. If the liquidation reserve is distributed before the company is liquidated and within five years of the creation of the reserve, a withholding tax of 20% will be due (effectively bringing the total tax to 30%). If the distribution takes place after more than five years from the creation of the reserve, a withholding tax of 5% will be due (effectively bringing the total tax to 15%). No withholding tax is due if the liquidation reserve is distributed upon liquidation of the company.
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Not applicable.
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Not applicable.
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In principle, capital gains on shares in a property company are exempt from corporate tax provided that:
If one (or more) of the three conditions are not fulfilled, the capital gain will be subject to corporation tax at the ordinary rate of 25%.
Capital losses on sales of shares are not deductible, except where the company is wound up, and even then, only up to the amount of the paid-up capital of the liquidated company, or except where the shares form part of the trading profit of credit institutions and investment undertakings.
Capital gains realized by Belgian individuals on the sale of shares held for business purposes are normally taxed at the general progressive income tax rates. A separate tax rate of 16.5% (plus a municipal surcharge) applies if the shares were held for more than five years. The minimum five year holding period does not apply when the capital gains are realized in the context of the winding-up of a business or a branch of a business.
Capital gains realized on the sale of shares by Belgian individuals that were not held for business purposes are tax-exempt, unless the sale does not qualify as a normal act of asset management. In these circumstances, the capital gain is subject to a tax rate of 33%, supplemented by municipal surcharges.
The sale of shares in a property company is not subject to registration duties or VAT.
Capital gains realized on the sale of a real asset held directly (buildings as well as land) are subject to normal corporation tax. However, a system of deferred and spread taxation applies if the proceeds are entirely reinvested within three to five years in depreciable intangible or tangible fixed assets that are used for business purposes in Belgium or in any other member state of the European Economic Area (EEA). Losses related to real estate can be offset against other income. Tax losses may be carried forward indefinitely, but their use in a given tax year is limited to € 1 million plus 40% of the taxable basis in excess of €1 million. Any carried-forward tax losses that cannot be used due to this limitation may be further carried forward indefinitely.
Capital gains realized by non-resident companies on the sale of immovable property in Belgium are subject to a withholding tax retained at source by the notary public. Afterwards the companies may offset any relevant charges and losses carried forward against this income through their annual tax return. As such the withholding tax only constitutes in a pre-financing cost.
Capital gains realized by individuals on the sale of real estate assets held for business purposes are normally taxed at the general progressive income tax rates (plus a municipal surcharge). This system of deferred and spread taxation also applies to individuals. A separate tax rate of 16.5% (plus a municipal charge) applies if these real estate assets are held for more than five years, in which case, the system of deferred and spread taxation will not apply.
Capital gains realized by individuals on the sale of real estate assets that are not held for business purposes are taxed at a separate rate of 16.5% (plus a municipal charge), if they are sold within five years (in the case of buildings) or eight years (in the case of land) from their acquisition.
The transfer of ownership or disposal of real estate interests in Belgium is subject to a 12.5% registration duty (12% in the Flemish region), payable by the buyer and calculated on the basis of the contractual price or the market value, whichever is higher. Under certain conditions reduced registration duty rates of 4% in the Flemish region, 5% in the Walloon region and 8% in the Brussels region apply to purchases by corporate entities (or individuals) whose business activities mainly consist of buying and selling real estate.
The acquisition of new buildings is subject to VAT (generally at 21%). A building is considered to be ‘new’ for VAT purposes until 31 December in the second year following the year the building was first put to use. Not only new buildings but also, in some cases, old buildings that have been thoroughly renovated can be regarded as ‘new’ buildings for VAT purposes.
The purchase of land belonging to a ‘new’ building, is subject to the same VAT treatment as the purchase of the new building, if that land and the new building are sold simultaneously by one and the same owner. No VAT is due on the part of the price attributable to the land in the event the building is not new or if these conditions are not met. Registration duties will however then be payable on that part of the price which is attributable to the sale of the land.
Transfer tax is usually payable by the buyer. If this is not the case, the tax is deemed to be included in the purchase price and grossing up will be necessary.
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Costs may include legal and financial advice. Professional advisors normally charge an hourly rate for their services. Estate agents normally work on a commission basis related to the purchase price, depending on the property and the size of transaction.
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What costs/charges (other than tax) are payable by the owner of real estate and who are these payable to?
Not applicable.
Last modified 22 Mar 2024