Expansion of reduced VAT rate for demolition and reconstruction... But only for rental properties

Mar 21
Six months after the reduction of the reduced VAT on demolition and reconstruction, the federal government reintroduces the benefit for homes and apartments intended for rent.

Investors in rental properties will soon have the opportunity to build at 6 percent. This was announced in a press release by federal Minister of Finance, Vincent Van Peteghem.

The announcement is a (partial) reversal from the decision at the end of last year to significantly reduce the reduced rate for demolition and reconstruction. At that time, the government ended the temporarily reduced VAT rate of 6 percent for demolition and reconstruction, which was introduced in 2021 as a support measure for the construction sector during the COVID-19 crisis. Simultaneously, the permanent reduced VAT rate, that had been in effect since 2007 in 32 Belgian cities, was abolished. The reduced rate was only retained for individuals demolishing a building and constructing their sole and (principal) primary residence on the same plot. A specific measure for social rental was also provided.
This significant curtailment of the measure was a source of frustration for some developers, who filed an appeal with the Constitutional Court.

The government is now amending the measure, but remarkably only for the rental market.

Demolition of a building followed by the construction of a rental property will soon fall under the 6 percent VAT rate. Three social conditions are linked to the new preferential rate:

- There is a maximum habitable area of 200 m²;
- Only homes used as primary residences are eligible;
- To ensure that the measure has a sustainable effect on the rental housing market for families and single individuals, the reduced VAT rate can only be used when the rental properties are leased for at least 15 years to one or more consecutive private tenants. The property must not be sold or used for other purposes.

The preferential rate is therefore no longer limited to 32 municipalities but applies to the entire Belgian territory.