The government has decided that the reduced VAT rate of 6% for demolition and reconstruction will be effective for dwellings intended for private rental. 

Victoria Seeds of Law

Demolition and reconstruction projects that are rented out to private tenants will again fall back under the 6% VAT regime. Prior to this decision, such demolition and reconstruction projects fell out of scope and were thus invoiced at a rate of 21% VAT.

Indeed, since the last change in the law, the reduced rate was only applied to demolition and reconstruction projects of private individuals who built their own homes and/or legal entities that built homes for subsequent long-term rental as part of the social housing policy.

The real estate sector was anything but happy about this, citing, among other things, the argument that it would promote degradation, especially in central cities.

The finance minister clearly has listened to the property sector. He has recently announced that the regime of the reduced VAT rate of 6% will thus again be extended to demolition and reconstruction projects relating to dwellings for private rent. This now is also approved by the government. 

This measure enters into force on 1 June 2024 and will be linked to the three (known) conditions, which were already applicable to projects eligible for the reduced VAT regime previously :

  • a maximum habitable area of 200m2;
  • the property must serve as the main residence;
  • the property must be let for at least 15 years to one or more private tenants and may not be resold or used for other purposes.

Otherwise, the regulations are likely to remain unchanged.

Finally, we inform you that a request to annul the reduced VAT regulation has been filed with the Constitutional Court. It is possible that the announced extension of the scope of the reduced VAT rate of 6% for demolition and reconstruction projects for private rentals is included in this procedure.

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Peter Moerman

Peter Moerman

Pieterjan Smeyers

Pieterjan Smeyers

Tax Partner