A draft law “containing various provisions on value added tax” amends several provisions of the Belgian VAT Code and a number of implementing Royal Decrees. The most notable change is the introduction of a fifteen year adjustment period for VAT deducted on certain renovation works, in particular where those works display characteristics comparable to those generally attributed to immovable property. For the purposes of the adjustment period, the distinction between “renovation” and “reconstruction” is no longer decisive (Parl. Doc., Chamber, 2025–2026, no. 56-1205/001). The draft law was approved at second reading in the Chamber Committee on 21 January 2026.
The intention is for Belgium, as from the entry into force of the new rules, to adapt the VAT adjustment regime for this category of renovation works. Under the current system, new buildings and the acquisition of “new” buildings are subject to a fifteen year adjustment period, whereas major renovations and extension works in practice often fall outside the adjustment mechanism after five years, unless the works must effectively be regarded as “reconstruction”. That qualification in essence requires a very far-reaching change to the nature or structure of the building.
The direct trigger for this change in approach is the Drebers judgment (C-243/23, 12 September 2024). The Court of Justice held that Belgium infringes the principle of fiscal neutrality where renovation works with an economic impact comparable to that of new construction are subject to a shorter adjustment period solely because they do not meet national criteria for new buildings. Belgium therefore had to respond, either through an adjustment of administrative practice or through legislation. The choice has been made for a legislative intervention.
The current framework
The deduction of VAT on capital goods is subject to adjustment. In Belgium, the rules are laid down in Articles 48, § 2 and 49 of the VAT Code, read in conjunction with Royal Decree No. 3. The standard adjustment period is five years. For VAT on transactions that aim at or contribute to the creation of immovable capital goods (buildings), a fifteen year period applies, and for buildings rented under the VAT option even a twenty five year period. These longer periods are logical, as buildings have a long economic life and their use may change over time.
The VAT Directive also starts from a basic period of five years, with the possibility for Member States to extend this period to a maximum of twenty years for immovable investment goods (Articles 187 and 189 of the VAT Directive). Member States enjoy a margin of discretion in this respect, but must exercise it in line with the objectives of the Directive and the principle of neutrality.
In Belgium, conversion and improvement works to buildings are in principle subject to the five year adjustment period, as they are generally treated as services. This changes only where the works are so extensive that, for VAT purposes, a “new building” is created, allowing for a taxable transfer or rental. This is referred to as “reconstruction”, a concept that gives rise to considerable debate in practice.
This is where the core difficulty lies: some major renovations have the same economic investment character as the building itself, yet they often fell within the shorter adjustment horizon.
The core of the legislative amendment: 15 year adjustment for durable renovation works
The legislative amendment aims to make the fifteen year adjustment period applicable as from 2026 to renovation services that “display characteristics comparable to those generally attributed to immovable capital goods”. The focus therefore shifts to the question whether the works, in view of their effects, have an economic life comparable to that of a (new) building.
It is important to note that the legislator deliberately refrains from introducing a closed list. The choice is made for an economic test, clearly in line with Drebers, which necessarily makes the assessment fact driven. In practice, this will depend on the nature and scale of the works, their structural impact and, above all, the durability of the result, in other words the economic life of the intervention. The explanatory memorandum also announces an administrative circular providing additional guidance. The concrete delineation will therefore be shaped to a large extent through administrative clarification and case by case analysis.
Entry into force with retroactive effect
Initially, the reform was intended to enter into force on 1 January 2026. However, the text approved at second reading in the Chamber Committee provides that it will enter into force on the day the law is published in the Belgian Official Gazette. The explanatory memorandum further links the application of the new rules to relevant changes in use occurring as from that date, regardless of when the taxable event and the VAT chargeability in respect of the works arose, provided that the adjustment period is still running. An adjustment period that has already fully expired under the current rules cannot therefore be revived.
Concluding remarks
With this legislative amendment, the legislator seeks, following a condemnation by the Court of Justice, to bring the adjustment rules more closely into line with EU law. Going forward, the adjustment period should be driven more by the investment character and the economic life of major renovations, and less by the formal label of “new building”.
That said, the reform also creates uncertainty. By opting for an open norm, interpretative pressure arises and there is a real risk of divergent applications in practice. Much will depend on the announced circular. It must clarify in concrete terms which criteria apply and where exactly the line is drawn between “traditional” renovations and works with an investment character comparable to that of a building. Only then will it be clear when the fifteen year adjustment period applies.
In addition, the question arises as to the legal robustness of the former rules. In practice, many disputes already exist regarding such classifications, and these files are often highly technical and are increasingly being brought before the courts.
In short: once again, the final word has not yet been spoken.
