Since 2006, homes in 32 Belgian cities and municipalities have been able to be demolished and rebuilt at a favorable VAT rate of 6 percent. The condition was that the house was subsequently used as a private home.
“The measure was interesting for urban renewal because investors were encouraged to demolish old buildings,” says Korneel Decroix, lawyer at Eubelius. ‘The reduced VAT rate for the reconstruction did not apply to the sale, which took place at 21 percent VAT.’
In 2021, this permanent measure was temporarily expanded. Since then, the preferential rate of 6 percent VAT applied throughout the territory when it came to the only owner-occupied home. It had to remain their only home for at least five years. “This temporary extension also allowed a promoter to demolish a building, rebuild it and then sell the homes at 6 percent VAT instead of 21 percent if it was the buyer’s only home,” says Decroix.
The extension would expire at the end of this year. But this week the government decided that there will be an extension, subject to certain conditions.
Maximum land area
From 2024, every private individual can demolish and rebuild a home at 6 percent VAT if he meets two conditions.
From 2024, every private individual can demolish and rebuild a home at 6 percent if he meets two conditions. The home must be the client’s only home for at least five years and the rebuilt surface area may not exceed 200 square meters.
As a result, project developers and investors can no longer use the preferential rate, even in the 32 cities and municipalities where it was previously possible. Anyone who buys a home from a project developer will no longer be able to do so at 6 percent VAT.
Projects for which the environmental permit was applied for before July 1, 2023 are subject to a transitional arrangement. VAT can still be invoiced at 6 percent until the end of 2024.
Anyone who demolishes and rebuilds a home to use it as a second home or to rent it out can enjoy the favorable rate until the end of 2024 if the environmental permit is submitted before January 1, 2024.
Criticism
The exclusion of project developers has attracted a lot of criticism in the sector. “In our country, around 30,000 homes need to be renovated every year to meet the housing shortage,” says Niko Demeester, CEO of the construction federation Embuild. ‘Project developers have the capacity to renovate that large number of homes. This measure will only make housing more unaffordable.’
The Network of Architects Flanders is also not completely satisfied. “The decision is a cancellation of the inner-city construction projects that we absolutely need to realize the construction shift, the energy transition and the circular transition,” says director Steven Lannoo.
On top of that, the rules are too complicated, says Bart Buelens, a VAT specialist from VAT Consult. ‘There is also a reduced renovation rate for homes older than ten years. Due to the complexity of the measures, you often do not fall under any of them. This is already leading to many discussions in practice and will certainly not diminish.’
And what about the Breyne law, which guarantees the stated total price for those who buy an off-plan home or a turnkey home? “The Breyne law cannot be invoked against the effect of a VAT increase,” Decroix said.
Another thing: the government also decided that from January 1, 2024, the VAT rate for heat pumps will remain at 6 percent for homes less than ten years old.