Background
The De Wever I government has agreed on a series of reforms and measures in various policy areas in a nearly 200-pages Coalition Agreement. We focus below on a series of reforms and measures that will directly or indirectly impact the real estate sector.
VAT reduction for demolition and reconstruction
The Coalition Agreement maintains and expands the scope for demolition and reconstruction at a 6% VAT rate, while retaining current social benefits. The 6% VAT rate is extended to deliveries, but the surface criterion has been reduced from 200 square metres to 175 square metres, to focus incentives on small residential projects.
The new government's aim is to strengthen effective renovation policies in the Regions to meet EU and Belgian sustainability criteria and simplify the federal housing tax system.
The government also intends to define "renovation" and "redevelopment" precisely and will explore the possibility of introducing a sustainability requirement within European policies.
VAT on heat pumps and fossil fuel boilers
The VAT on heat pumps will be temporarily reduced from 21% to 6% for the next five years to encourage energy-efficient renovations. Conversely, the VAT on fossil fuel combustion boilers will increase from 6% to 21% for renovations of homes older than ten years.
Modernization of the Breyne Law
The government plans to modernize the Breyne Law following consultations with the sector and consumer organizations. This includes closing existing loopholes in the law, enhancing enforcement by the economic inspection, and optimizing and expanding professional bans. Additionally, the government announced the establishment of a full-fledged Ombudsman Service for the construction sector.
Reform of the Belgian Buildings Agency (Régie des Bâtiments/Regie der Gebouwen)
The Belgian government intends to reform the Buildings Agency into a professional entity that efficiently manages state assets. This includes creating a comprehensive real estate inventory, optimizing asset management, and reducing leased office space by 15% over the legislative term.
The Buildings Agency will also prioritize energy efficiency, accessibility for people with disabilities, and thorough renovations of key buildings like the Zuidertoren and the Brussels Palace of Justice.
Energy Performance Certificate
The Coalition Agreement proposes granting lenders access to the EPC database, with a practical framework to be developed in collaboration with the Regions. Additionally, it supports incorporating energy efficiency into banks' risk management and analyses. In coordination with the National Bank of Belgium, the government is also exploring ways to loosen mortgage loan conditions for purchasing energy-efficient properties, while maintaining the integrity of the regulatory supervision process.
Associations of Co-Owners (ACOs)
The ACO decision-making process for buildings under forced co-ownership will be streamlined to require only a simple majority for energy-related projects. This reform aims to remove barriers to energy renovations and the installation of renewable energy solutions like solar panels and charging stations.
Additionally, the new government is advocating for ACOs to develop multi-year investment plans for climate-related projects, enabling owners to better forecast upcoming investments. The government is also exploring ways to enhance ACOs' access to financing for energy renovations through financial institutions.
Share deals involving real estate companies
The Coalition Agreement also includes a very short statement on the federal government wanting to help the Regions to combat share deals on real estate companies if the Regions wish so. This refers to situations in which transfer taxes on real estate transactions are evaded through share deals and seems to focus on audit support. Details of what the federal government has in mind are, however, not known but this should not change the criteria to conclude to tax evasion and therefore not have an impact on most share deals in a real estate context. The federal and regional legislators have indeed never aimed to make the transfer of shares in real estate companies subject to transfer taxes.
Other relevant measures
See also hereunder a selection of measure pertinent to the real estate sector:
- Tax measures
- Capital gains on shares: Introduction of 10% capital gains (above EUR 10 million) tax for individuals selling shares (including real estate companies) with a grading scale of tax rates for individuals (between 1,25 – 10%), with a participation exceeding 20% who should also benefit from a tax exemption for the first EUR 1 million.
- Participation exemption: Increase of alternative minimum participation condition from EUR 2.5 million to EUR 4 million (this is an alternative for corporate shareholders not holding 10%) and requirement for these shares to qualify as financial fixed assets.
- Tax audits: Reduction of the standard statute of limitations for income tax to three to four years, with fraud cases to seven years (instead of the current 3-10 years).
- Phasing out federal housing tax relief: The federal interest deduction for non-owner-occupied housing will be abolished.
- Green investment deduction: The existing investment deduction will be simplified and made more accessible for investments in the energy transition. The rates for the enhanced investment deduction for the energy, mobility, and environmental sectors will be standardized at 40%. In addition, a general carry-over without limitation in time will be foreseen for investment in green energy, technology and climate friendly investments.
- Funds (SICAV-RDT/DBI-BEVEKS): A new 5% levy will apply on capital gains realized at the time of exit. Additionally, the crediting of withholding tax against corporate income tax will only be permitted if the receiving company grants a minimum director's salary in the year of dividend distribution.
- Environmental measures
- Phasing out PFAS: Belgium is dedicated to phasing out PFAS at the European level and establishing a common standards framework. The federal government will support regional efforts to remediate historically contaminated sites, and a sector-funded PFAS fund will be made operational.
- Reuse of waste and circular raw materials: The federal government is collaborating with regional authorities to improve the reuse of waste and circular raw materials in the construction sector. They will adjust product standards to ensure that recycled building materials maintain their quality.
Next steps
While some measures require further clarification, others, such as maintaining and extending the 6% VAT rate, could potentially be swiftly implemented. As certain measures remain vague, it is essential to closely monitor the forthcoming actions of the new government, which we will certainly do.
We are here to assist you in navigating these reforms. Please feel free to contact us with any questions or to discuss how this may impact your business.
