What taxes are payable on the sale of real estate and can these be reduced or offset in any way?
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.
