Dependence on the dwelling or separate property?
Dependence on the dwelling or separate property?
July 2022 – The concept of "outbuilding" is sometimes used in matters of registration and inheritance tax. In this case, it is a construction that is an accessory to the main building. But when does a building cease to be an accessory and become separately taxable?
Outbuilding
The term " outbuilding " is somewhat outdated. It is found in the old tax laws of our country... the registration and inheritance tax laws. In the registration duty system, the term is used, for example, when buying a house with reduced registration duties (the so-called "klein beschrijf"). The reduced rate applies not only to the house itself, but also to the outbuildings.
The Flemish Tax Administration (Vlabel) considers that an outbuilding is only relevant for inheritance tax purposes if the following conditions are met:
the outbuilding is an accessory to the dwelling, and not the other way around ;
the outbuilding is consistent with the function of the dwelling (e.g. garage, garden, etc.) and is not used for economic purposes; and
the outbuilding meets certain criteria in terms of location:
if it is land, the land must adjoin the parcel on which the dwelling is located; and
if it is a garage, it must be located in the direct vicinity of the dwelling.
In Flemish inheritance tax ("erfbelasting"), the term is used in connection with the exemption for the surviving partner. The surviving partner does not have to pay "erfbelasting" on the part of the family home that he or she receives from the premature partner and this exemption relates to the family home "and its outbuildings". It is precisely this situation that the Ghent Court of Appeal will be called upon to rule on in early 2021.
Forest area
Mr X and Mrs Y are married. They have a marriage contract which provides for a separation of property, but during their marriage, Y brings a piece of land of about 80 ares, which she received from her mother, into the community. After this donation, Y writes a will in which she defines the modalities of the division of this land between her 3 children. But when the land was brought into the community, an optional attribution clause was also inserted in the contract by virtue of which the surviving partner could choose to attribute the real estate to himself upon the death of the other partner. Mrs. Y dies and Mr. X decides to exercise his optional attribution clause with respect to the full ownership of the family home and the usufruct of the land.
The assessment raises a discussion concerning the land. According to X, the two original parcels - the lot on which the family home is located and the lot that was divided between the children - form a whole that must be considered the family home and its outbuildings. The estate tax exemption therefore applies to the whole.
Mediation
Initially, a mediator is appointed. The mediator notes that next to the lot consisting of the family home, there is a wood and gardens. The mediator intends to qualify 17 of the 80 ares as outbuildings, but the Regional Director refuses this proposal.
The regional director examines the legal division made by will, in which the 3 lots were estimated in the declaration of inheritance at 245 000 euros each. The lots abut another street and are of considerable size, with a significant street width.
The regional director considers that this is not a normal dependency.
What does the law say?
The challenge was brought before the Ghent Court of Appeal, which began by reviewing the legal provisions. The terms "dwelling" and "outbuilding" are actually taken from the registration law, which states that: A dwelling is defined as a house or a floor or part of a floor of a building, which is used or is intended to be used as a dwelling for a family or a single person, together with any outbuildings acquired at the same time as the house or floor or part of a floor. This definition is specified as follows in a Royal Decree of January 11, 1940 (!): Is considered as an outbuilding, for the application of articles 53, 2°, and 57 of the Code of Registration Fees, any built or unbuilt building which, according to its nature, its location, its surface area and its value, constitutes a "normal accessory", as the case may be, either of the house or of the floor or part of floor acquired under the regime of article 53, 2°, or of the dwelling to be built on the land acquired under the regime of article 57.
A question of fact
The Court uses Google Earth and Google Street View to assess the concrete situation. The Court can see on Google Earth that on all the lots under consideration there are trees that together qualify as woods. The Court can also see on Google Street View what the Mediation Officer wrote, that part of the woods is bounded by a fence. Once past this fence, the wood is accessible from the public road. The ensemble formed by the dwelling with garden is therefore located in a space that, in the front, begins at street level and, in the back (between the trees), is delimited by a fence. This area is directly adjacent to the house and is used as a garden by the occupants.
The Court considers, on the other hand, that the wood, past this fence, cannot be considered as a "normal dependence" of the dwelling. The Court therefore follows the solution of the Mediation Officer and considers only the 17 ares or so as a normal outbuilding.
The main reason why the Court considers this land to be an outbuilding is that this part of the land has always formed a unit of use. The fact that part of the land, like the unfenced part, is covered with trees is irrelevant in the concrete circumstances.
The Court also considers that the overall area (17,08 ares) is not unreasonably large. It recognizes that the market value of the land is considerable, but this is related to the fact that it is in a residential area. This does not change the fact that the area in question was used as a garden.
Conclusion?
As we have said, it is always a question of fact. From this interesting decision of the Ghent Court of Appeal we conclude that the value of the outbuilding, the fact that it is a separate cadastral parcel or what is on the lots is relevant, but not decisive. We also conclude that it is much more important that the outbuilding forms a de facto unit with the family home. A fence can be a very good indicator in this case.