A new tax benefit for rent waivers
June 2021 – At the beginning of April, a new tax benefit was introduced which should encourage owners of commercial properties to grant a rent waiver to their tenants. However, the advantage is not very significant and will therefore not be a major argument for granting a rent waiver.
Measure Covid-19
This Covid-19 measure is specifically aimed at traders who have been heavily affected by the lockdown. The tax reduction and the rent waiver offer them a breath of fresh air. The measure can be combined with the Flemish and Brussels commercial lease loan.
The advantage takes the form of a tax reduction for personal income tax (and non-resident/individual income tax) and a non-refundable tax credit for corporate income tax (and non-resident/corporate income tax).
The benefit is in principle equal to 30% of the rent forgone for the months of March, April and/or May 2021.
However, it is subject to numerous conditions and restrictions.
The rent for a commercial building
The rent must relate to a building that the tenant uses for his business activity. A commercial lease automatically comes to mind, but in reality any form of letting is considered. However, it must be a commercial building.
If the rent relates to a building that is partly rented as a dwelling and partly as a commercial building, only the commercial part of the building is relevant. This also applies to (the part of) the building that is made available to a third party (the company director or an employee of the lessor company) or to a subtenant. No tax reduction for the waiver of rent is granted for this part.
The measure applies to the "rent" foregone, but also to the "rental benefits". The term "rental benefits" refers to the "recurring financial charges" payable by the tenant. Consider, for example, the property tax.
Non-cash or one-off charges are not taken into account.
The tenant
The tenant must be a self-employed person, a small company or a small association during the period in which the rent is waived. He/she must also be active as a company according to the Crossroads Bank for Enterprises.
Important condition: the commercial property has been closed as a result of the Covid-19 measures since 12 March 2020.
If the tenant is a restaurant owner who has continued to operate as a takeaway, the landlord cannot benefit from the measure.
But the mandatory closing of shops at night between 10 p.m. and 7 a.m. is not covered; the lessor cannot benefit from the measure in this case.
Other conditions for the tenant:
there was no rent arrears before 12 March 2020;
the company is not a company in difficulty;
the tenant and the lessor have no special relationship. For natural persons, we are thinking of family members, spouses, cohabitants. Company directors who rent to their company are excluded (and this also applies to the family members of these company directors). The lessor (and his relatives) may not hold more than a 30% stake in the lessee company either. If both lessor and lessee are companies, reference is made to the provisions on related companies in the Companies and Associations Code.
The waiver
The aim is that the rent and rental benefits no longer have to be paid. The waiver must relate to the months of March, April or May 2021. A lessor can therefore waive one or more months' rent. He can also waive part of the rent, provided that he waives at least 40% of the rent and rental benefits.
Other conditions:
the waiver must be voluntary (i.e. it cannot be imposed by a judge, for example)
the waiver must be final and irrevocable;
the waiver must be agreed in writing. This agreement must be submitted to the tax authorities in order to benefit from the reduction (by 15 July 2021 at the latest).
Calculation of the tax credit/reduction
The tax reduction (or tax credit if the lessor is a company) amounts to 30% of the rent waived.
However, there is a ceiling on the amount of the waiver.
Firstly, the amount that counts towards the tax reduction/credit cannot exceed 5,000 euros per month and per lease agreement.
Secondly, the total amount that can be taken into account for the tax reduction/credit by the lessor is 45,000 euros per taxpayer for all lease contracts combined.
For personal income tax, this is a tax reduction that cannot be converted into a tax credit. This means that if the lessor does not pay enough tax to absorb the tax reduction, it is lost.
For companies, these are not tax reductions, but tax credits. But this tax credit is calculated in exactly the same way and is not refundable if the corporate tax due is not sufficient to absorb it.
Anti-abuse provision
Finally, it should be noted that the new law explicitly mentions an anti-abuse provision. This anti-abuse provision is aimed in particular at the case where a lessor waives the rent and immediately thereafter proceeds to an unjustified increase in the rent. The sanction is that the tax reduction/credit will not be granted. The question of the price increase is more a matter of civil law.
