The 6% VAT application in the construction sector will temporarily be extended as from 2021

1. Why the Federal Government introduced this measure?

The corona crisis is having an impact on the order books of building contractors and on the budgets of citizens and families. These measures should make it possible to build or buy a house more cheaply.

These new temporary measures also apply to real estate promoters.

2. What is the basic rule?

The demolition of a building and the subsequent reconstruction of a private house benefit from the reduced VAT rate of 6% in 32 Belgian cities.

In order to benefit from this advantage, the following conditions must be met:

• demolition and reconstruction constitute one single operation;
• the building to be constructed is exclusively or mainly intended as a private residence;
• a prior declaration is made by the builder and a stipulation about it is made on the invoice;
• the private house is located in one of the following 32 cities:
  • the urban centres of Antwerp, Charleroi, Ghent, Ostend, Mechelen, Mons, La Louvière, Sint-Niklaas, Seraing and Liège;
  • on the territory of the Brussels-Capital Region: Brussels, Anderlecht, Saint-Gilles, Saint-Josse-ten-Noode, Molenbeek-Saint-Jean, Schaerbeek, Forest, Ixelles, Uccle, and Etterbeek;
  • Leuven, Bruges, Courtrai, Roeselare, Aalst, Dendermonde, Genk, Hasselt, Mouscron, Tournai, Verviers, Namur.

This rule will of course remain in force after 31 December 2022.

3. What additional measures have been taken?

3.1 Extension of the basic rule

For the period from 1 January 2021 to 31 December 2022, the basic rule will apply to the entire Belgian territory and not only to the 32 cities referred to above, if:

• it concerns exclusively or mainly the sole habitation and the owner-occupied home;
• that home will be used by the owner-occupier himself;
• this person takes up residence there without delay for a period of 5 years, counting until the 31th of December of the year following the year of first occupation. If this condition is not respected, the benefit must be repaid for the current year and the remaining years of the 5-year period;
• The total habitable surface is max. 200 m².

How does the government calculate the habitable surface?

The habitable surface is the sum of the surface of all living quarters, measured from and to the inside of the walls. 

The habitable surface includes kitchens, living rooms, dining rooms, bedrooms, living areas in the attic and cellars, offices and all other areas intended for housing, provided they have a minimum surface area of 4 m² and a minimum height above the floor of 2 meters.

Spaces used for the exploitation of an economic activity are also included. 

3.2 Reduction of the 12% VAT rate to 6% in the context of social rentals

For the same period, the VAT rate for the demolition of a building and the associated reconstruction of a private house intended for long-term rental as part of social policy will also be reduced from 12% to 6%.

These are the conditions for benefiting from this measure:

• The building in question must be let to a social landlord's office or as part of a mandate given by the owner to a social landlord's office;
• This social rental must be for a period of 15 years, until 31 December of the year following the year of first occupation;

If the conditions are no longer met, a declaration must be submitted and the benefit must be repaid for the current year and the remaining years of the 15-year period.

3.3. Also a reduced VAT on real estate sales

The reduced rate of 6% has also been made applicable to the transfer of houses and associated land by the taxpayer who has carried out the demolition of a building and the associated reconstruction of a private house.

This is also applicable to the establishment, transfer or re-establishment of rights in rem (other than ownership and specific exceptions provided for in the VAT Code), to a private house and associated land, which are not exempted from VAT (e.g. in the case of new construction). 

It concerns a transaction on which the tax due became payable between 1 January 2021 and 31 December 2022.

In addition, it must be a private house which is the only owner-occupied property intended for the domicile of the buyer-natural person or intended for letting to a social landlord's office.

4. What about current projects?

Ongoing projects can also benefit from this new measure, provided that the declaration is submitted by 31 March 2021 at the latest.

The system will end on 31 December 2022, but will also be limited depending on obtaining your building permit. If you obtain your permit after 1 July 2022, you will only be able to invoice up to a maximum of 25% of the total amount of the works at 6%. In addition, this is invoiced no later than 31 December 2022.