The Belgian government has decided to retain the reduced VAT rate for demolition and reconstruction, albeit with restrictions. Who is still eligible for this new measure?
The reduced VAT rate of 6 percent instead of 21 percent for new construction will continue to apply to homes that are completely demolished and rebuilt. This favorable arrangement was introduced in 2021 for a period of two years and was subsequently extended by one year, until December 31, 2023. Although the scheme was already permanent in 32 cities across the country, the federal government has now decided to make it permanent and applicable nationwide.
However, there are a few caveats: the favorable scheme will now only apply to builders. As of January 1, 2024, property developers (who sell rebuilt homes) will no longer qualify for the measure. Additionally, there are further conditions. It must be the sole residence. Homes intended for long-term social rental (via social rental agencies) would also be eligible for the measure.
To qualify for the reduced rate, the demolition (of a ‘building’) must be followed by the reconstruction of a home. After the work is completed, the building must be used exclusively or primarily as the sole private residence.
It is permissible for a portion of the home to be used for professional purposes, as long as private use predominates. However, second homes and homes intended for rental are not eligible. Moreover, you may not own another property. Homes of which you are a co-owner, bare owner, or usufructuary through inheritance are not taken into account.
Furthermore, it is expected that the "social" conditions of the temporary rate will be extended to the permanent reduced rate. In that case, the habitable area of the rebuilt home must not exceed 200 square meters, and the property must remain the builder's or buyer's sole and primary residence for five years.
A transitional measure is likely to be provided until the end of 2024 for projects already underway under the existing temporary scheme.
The biggest impact of new measures will therefore be on property developers, as the temporary VAT reduction is being eliminated, and the permanent reduction is being adjusted. This means that from next year on, the sale of homes rebuilt after demolition will no longer qualify for the reduced VAT rate for demolition and reconstruction.