Yesterday, the Belgian government reached an agreement on several tax measures, including a corporate tax reform and the introduction of an option to apply VAT on immovable letting. Although these measures will be developed further in detail in the coming months, it is already certain they will have an important impact on the Belgian real estate market.
Corporate tax: decrease of corporate tax rate
The general corporate tax rate of 33.99% will be lowered to 29% in 2018 and to 25% as from 2020. SMEs would even see a decrease in the rate to 20% as from 2018 for the first tranche of 100.000 euros.
In order to finance such decrease, the reform will however contain some additional budgetary measures. Details on such “compensatory” measures are anticipated to be made available in October, but it is expected that some of these measures will have an impact on Belgian real estate companies (e.g. introduction of minimum tax base via limitation on the use of certain tax attributes, 30% EBITDA interest limitation rule, …). The introduction of these measures and their impact on the effective tax rate should be closely monitored.
VAT: option to apply VAT on immovable letting
Secondly, the Belgian Government decided to introduce the possibility for landlords to apply VAT on immovable lettings. For years, investors and landlords in Belgium have been struggling with the cost of non-recoverable or hidden VAT on their real estate as most forms of lettings are VAT exempt. With the new optional regime, the cost of investing in real estate should decrease significantly as input VAT paid on construction and operating costs will become recoverable.
Clearly, the initiative of the Belgian Government is excellent news for both investors / landlords and end-users and helps raise our country’s and the markets’ competitiveness. Plans are to implement the new regime still in 2018. More information on the scope and confirmation of exact timing of the new regime will come.
PwC Real Estate will closely monitor the above measures.
Do not hesitate to contact us in case you would like to discuss more in detail the impact of the new measures on your investments.
Grégory Jurion, Partner, Real Estate Industry Leader, +32 (0)2 710 9355
Evelyne Paquet, Director, Real Estate Corporate Tax, +32 (0)2 710 4354
Manuel Van Der Veken, Director Real Estate VAT, +32 (0)2 710 4404
Dieter Dilliën, Manager, Real Estate Corporate Tax, +32 (0)2 710 7211