Immovable renting with VAT will soon be possible

As of 1 October VAT payers will be able to rent out immovable property with VAT. Clear advantage is that the landlord can deduct VAT on its investment and costs. For the tenant the rent is also deductible. With these new rules the Government wants to simplify the VAT rules and improve the competitive position of Belgium.

Optional scheme

Already in last year's summer agreement the Government planned to introduce an optional scheme. For budget reason these plans were abolished. At the end of March the Government after all decided to introduce such scheme.

It is an optional scheme. The landlord and tenant should decide together to apply it. If they don't, the normal rules apply and the renting of immovable property is VAT exempt.

Conditions

The renting out of immovable property under VAT is only possible for new buildings or after thorough refurbishments of existing buildings. Thorough refurbishment means that cost of the works amounts to at least 60% of the sales value of the building after the refurbishment. The tenant should be a VAT payer using the building for its economic activity.

Consequences of the option

If parties opt to apply the scheme:

The landlord will charge VAT on the rent.

The landlord can deduct VAT on the investment and costs.

The tenant can deduct VAT on the rent.

Mandatory VAT application on the rent of certain goods

In principle, the renting out of immovable property is still VAT exempt. The optional scheme is a voluntary exemption to this rule. Next to this there are some mandatory exemptions, which remain in place.

There is always VAT due on:

the letting of premises and sites for the parking of vehicles.

the provision of accommodation in the hotel sector or in sectors with a similar function.

camping sites.

the letting of permanently installed equipment and machinery.

the hire of safes.

New: short term renting always taxed

To this list, the Government adds a new exemption. As from 1 October 2018 the short term renting of immovable goods will always be subject to VAT (e.g. renting of party rooms, congress halls).

As from 1 October

The new rules enter into force on 1 October 2018.

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