When increased interest rates and relatively high indexation make the economic outlook uncertain, companies might look to cut unnecessary costs. Although the strong changes in indexation during 2023 seem to be mostly behind us – indexation currently averaging between 2 and 3% in Belgium – indexation still has a big impact on the tax situation of companies holding real estate assets. Belgium indeed foresees an annual tax, being the immovable withholding tax (“IWHT”), that is due by any owner (or holder of a property right) of real estate assets situated in Belgium and which is automatically indexed every year.
While this economic burden is often passed on to the tenants, this is not possible in case of vacancy. As a result, businesses suffer a double cost due to vacant real estate, being (i) the non-rechargeable IWHT and (ii) the loss of (expected) rental income.
In case such vacancy is noticed during the due diligence process when taking over a company holding real estate or even in the post-deaI phase, a tax optimization might be available which could further enhance the ROI as initially envisaged by cutting unnecessary costs.
Indeed, in certain instances of vacant real estate assets located in the Flemish Region or the Walloon Region, a reclaim of the paid IWHT proportional to the duration of the vacancy can be filed. Several conditions (to be assessed per cadastral parcel) must be met (a.o. minimal period of vacancy, unfurnished constructed immovable property, etc).
To be valid and to be in a position to obtain a refund, such a reclaim must be filed timely:
- In the Flemish Region: before 31 March of the year following the assessment notice or, in case the assessment notice is only received the year after the financial year to which the IWHT relates, 3 months since the receival of the assessment notice.
- In the Walloon Region: within 6 months to be calculated in principle from the 3rd working day following the date of sending of the assessment notice.
As for real estate assets located in the Brussels-Capital Region, no specific reclaim for vacancy is foreseen by Belgian tax legislation. However, other opportunities to save costs for vacant real estate assets might be available for owners of assets located in the three Regions in Belgium (incl. in the Brussels-Capital region), especially in case of redevelopment of an asset whereby the building is either fully demolished and rebuilt or under a heavy renovation program which materially impacts the asset.
PwC can of course support you in analyzing whether any cost savings can be performed as well as assisting you with the effective reclaim of IWHT. Please reach out to Grégory Jurion or Betsy Verriest for more information.
