Significant adjustments to Flemish registration duties and inheritance tax are on the horizon, as outlined in the new Flemish coalition agreement. These changes are set to impact estate planning practices. Below is an overview of what is known so far.
1. Reduction in registration duties
The most concrete measure concerns the reduction of registration duties from 3% to 2% for the purchase of the first own home. This measure will apply to all purchase deeds executed from January 2025, provided that the conditions are met.
2. Gradual reduction in inheritance tax
Starting in 2026, the Flemish government will implement a gradual reduction in inheritance tax. Specific percentages or threshold amounts of the brackets have yet to be announced, but it is already clear that the reduction will apply to all types of heirs (partners, descendants, siblings and other heirs). The focus will initially be on small and medium-sized inheritances and there will be special attention for situations where the deceased leaves behind no partner or descendants.
3. Compensation measures
However, the reform and reduction of inheritance tax will need to be compensated in other areas. It seems that the Flemish government plans to target tax-free donations.
Firstly, the Flemish government wants to discourage hand and bank donations. Specifically, the risk period for non-registered donations will be extended from 3 years to 5 years starting in 2026. If the donor dies during this risk period, the untaxed donation will be taxed as inheritance. After the new measure comes into effect, it will take longer for a non-registered donation to be definitively tax-free. The Flemish government hopes that in the future people will opt for peace of mind by registering donations and paying the fixed donation tax rate of 3% or 7%. With this measure, the Flemish government follows the example of the Walloon Region (in effect since 2022) and the Brussels-Capital Region (announced late 2023).
Additionally, the Flemish government has also announced its intention to close “illegitimate loopholes”. It has not yet been further explained what this entails exactly, but it seems to concern stricter conditions for applying the preferential regime for a tax-free donation and inheritance tax at 3% or 7% for family businesses that hold real estate and the use of private foundations.
Despite these upcoming measures, the Flemish government has confirmed that transferring assets via donations will remain more advantageous than through inheritance.
To be continued.
This contribution was realised in collaboration with Lennert Jeurissen.
