Real Estate – VAT : Administration denounces artificial split of transactions in important renovation projects – application of 6% reduced VAT rate and more at stake !


For years, certain promotors have been marketing reconstruction or heavy renovation projects at a 6% reduced VAT rate.

With its decision of 13 May 2014, VAT administration now clearly denounces legal constructions that have been devised with the [sole] purpose of attaining a reduced VAT rate and which consist in the artificial split of a sale of old property at 10 or 12.5% transfer taxes followed by the subsequent demolition-reconstruction or sufficiently important renovation by the vendor at a 6% VAT rate.

The schemes will be considered as the sale of “new” property subject to the standard 21% VAT rate.  The decision has far-reaching consequences in a number of areas and is relevant not only for the present and onwards but also for past projects.  Previously obtained diverging VAT rulings should however remain unchallenged.

This having said, the possibility to continue to apply a 6% VAT rate on the demolition and reconstruction or renovation of old property in other non-artificial circumstances remains in place.

For more information, please contact your regular PwC advisor.