Are the Adjustment rules in Belgium for immovable property due for Adjustment?

Will the Belgian rules for determining the adjustment period for renovation works soon have to be changed? That question arises now that the Ghent Court of Appeal has submitted preliminary questions to the European Court of Justice (C-243/23 Drebers).

There seems to be no end to VAT disputes in the real estate sphere. This is yet another case with the potential to shake up the VAT landscape in this sector.

The deduction of VAT on the purchase of capital goods is not final but subject to so-called adjustment rules. These rules can be found in various provisions, including Article 48(2) and Article 49 of the Belgian VAT Code, as well as in Royal Decree No. 3.

For movable capital goods, the adjustment period is set at 5 years. However, for VAT related to investments contributing to new immovable property, the adjustment period extends to 15 years. In the case of new immovable property leased under the optional VAT system, the adjustment period is even longer, spanning 25 years.

When it comes to renovation works on buildings, the investments are generally subject to the 5-year adjustment period. However, if the extent of the works results in the creation of a new building for VAT purposes, which can be sold or leased with VAT, it falls under the category of a converted new building. In such cases, the 5-year adjustment period may no longer apply. The interpretation of what qualifies as a converted new building has sparked considerable debate, with instances where the VAT administration has faced criticism from the courts.

Under the European Directive, the default revision period for capital goods is 5 years, with the possibility for Member States to extend it to a maximum of 20 years for immovable property acquired as capital goods. Member States have some discretion in defining the term “capital goods” within certain limits (as specified in Article 187 and 189 of the VAT Directive).

Finally, Member States must exercise their powers taking into account the objectives pursued by the VAT Directive, as well as the principle of fiscal neutrality inherent in the EU VAT system. In doing so, Member States should consider the objectives of the VAT Directive and the principle of fiscal neutrality that are inherent in the common VAT system.


The case at hand involves a law firm that owns premises used for both private and economic purposes. From 2007 to 2015, extensive renovation work took place. On January 1, 2014, the VAT exemption for lawyers was lifted, making the law firm liable for VAT.

Following a tax audit, the tax authorities identified multiple violations of VAT legislation between January 2014 and September 2015, resulting in a claim of €163,756.24 for outstanding VAT.

A portion of the claim pertained to VAT recovery through input VAT adjustment related to past renovations. The tax authorities argued that these renovation works did not result in the creation of a new building eligible for sale under the VAT system. Consequently, they contended that an adjustment period of 5 years should apply, instead of the 15-year period claimed by the taxpayer.

In contrast, the taxpayer believed that the renovation works were subject to a 15-year adjustment period. Consequently, he sought to reclaim some of the VAT paid prior to the introduction of the VAT liability.

The dispute ultimately had to be settled in court.


In his defense against the tax authorities, the taxpayer raised arguments challenging the Belgian legislation's strict transposition of the concept of "immovable property" as a capital good into national law. He contended that the legislation's application of the 15-year adjustment period exclusively to works resulting in a new building eligible for VAT sales is in violation of the VAT Directive.
The taxpayer maintained that, within the Community context, "immovable capital goods" generally encompass goods with longer useful lives, depreciation periods, and economic lifetimes. He argued that the economic lifespan of immovable property, as determined by the works or renovations performed on it, should be considered in its qualification as an immovable investment property under the VAT Directive.

Additionally, the taxpayer invoked the principle of fiscal neutrality, asserting that immovable investment goods with similar economic lives should receive equal treatment for VAT purposes, including having the same adjustment period.
Due to doubts regarding the conformity of Belgian legislation with Community law, the taxpayer proposed submitting preliminary questions to the European Court of Justice to seek clarification on the matter.

Preliminary question

This line of argument does not leave the Court of Appeals unmoved. It decides to put the following preliminary question to the Court of Justice:

1. Do Articles 187 and 189 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax preclude legislation such as that at issue in the main proceedings (namely Article 48(2) and Article 49 WBTW, read in conjunction with Article 9 KB No 3 of 10 December 1969, relating to the deduction facility for the application of value added tax), according to which the extended adjustment period (of 15 years) in the case of the renovation of an existing building is applied only if, after completion of the works, on the basis of the criteria under national law, there is a ‘new building’ within the meaning of Article 12 of the aforementioned Directive, whereas the useful economic life of a substantially renovated building (which, however, on the basis of the administrative criteria under national law does not qualify as a ‘new building’ within the meaning of the aforementioned Article 12) is identical to the useful economic life of a new building, which is considerably longer than the period of five years referred to in the aforementioned Article 187, which is shown, inter alia, by the fact that the works carried out are depreciated over a period of 33 years, which is also the period over which new buildings are depreciated?

2. Does Article 187 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax have direct effect, so that a taxable person who has carried out works on a building without those works leading to the renovated building being classified as a ‘new building’ within the meaning of Article 12 of that directive on the basis of criteria under national law, but where those works have a useful economic life which is identical to that of such new buildings to which a 15-year adjustment period does apply, may rely on the application of the 15-year adjustment period?

Essentially, the Court seeks clarification on whether the Belgian rule, which applies the extended 15-year adjustment period solely to conversions that meet the national criteria of a "new building," contravenes the VAT Directive when the economic useful life of a thoroughly remodeled building is the same as that of a new building. Additionally, it seeks to ascertain whether the taxpayer can directly rely on the European Directive.

The future of Belgian VAT adjustment rules for buildings is now in the hands of the Court of Justice. And as we know, this Court sometimes dares to be creative. To be continued!

*This contribution has been published on TaxWin (available at