Dwelling used solely as a tax residence
December 2021 – The term "own dwelling" refers to the family home occupied by the taxpayer. The real estate income from a dwelling of your own (the cadastral income) is exempt. However, this exemption does not apply if you do not personally occupy the dwelling. There is an exception to this rule which, although it is no longer provided for by law, is still applied in practice, at least in some cases.
Tax on the dwelling
Each property (building, land and sometimes even equipment) is assigned a cadastral income. If you are the owner of a building, you are liable to pay property tax on the (indexed) cadastral income of the building. The proceeds of the property tax are allocated to the regions, municipalities and provinces. It is the regions that set the rules for this tax. However, none of the three regions provides for an exemption from property tax for the home you occupy personally.
In addition, property income is subject to personal income tax. If you rent your property to a person who uses it for business purposes, you are taxed on the net rent (we will spare you the details of the calculation of the tax base). If you rent your property to a private person or if you do not rent it out, you are taxed on the indexed cadastral income.
If you use the property as your own home, you are exempt from personal income tax. This is the only exception.
Own home or not
In reality, it is not difficult to determine what is an own home and what is not. A dwelling is clean if you occupy it personally. If you do not occupy it yourself, it is not your own home, even if it is your only property.
Prior to the Sixth State Reform, the taxation of real estate income for personal income tax purposes was a federal responsibility. The law provided for an exception to the requirement of personal occupation of the dwelling: if you could not occupy the property yourself for business or professional reasons, it was still considered to be your own dwelling.
Thus, if you owned your own home, but your employer offered you accommodation closer to your place of work, your first property remained your own home even if you did not occupy it and had, if necessary, rented it out.
Since 2014, the regions have been responsible for the taxation of own homes (a transfer that has resulted, among other things, in new tax rules for housing credits in the three regions). The federal government remains responsible for all other housing. Consequently, you can still benefit from a tax reduction if you take out a loan for your second home. In Flanders, however, the tax reduction is no longer granted for a first home.
This transfer of competences led to the abolition of the exception to the obligation to occupy one's own home. In other words, if you lived in the house, you were entitled to a tax exemption granted by the region. However, if you did not occupy the home for social or professional reasons, you lost the benefit of the exemption and had to pay federal taxes.
This was very often unfair. A typical example of a social reason for not occupying the home personally is when the family home is rented out because the children and their mother feel that it would be better off in a nursing home. In order to avoid such situations, the then Minister of Finance decided, by administrative tolerance, to maintain the then existing rule.
Administrative tolerance contra legem
A tolerance measure is only useful if the administration applies it. But what if the administration decides to stop granting the tolerance without giving any further explanation? Some Antwerp tax officials probably did not read the internal guidelines correctly, because in two separate cases the taxpayer had to go to court in Antwerp to request the application of the tolerance.
In one of the cases, a man decided to move closer to his daughter so that he could visit his grandchildren more often. He had made his home available to his son.
The other case concerned a single woman who moved in with her son (next door to her own home). The mother's house had been rented to a company.
It is a mystery why the administration did not want to apply the tolerance. Did it consider that the reasons given were not sufficiently 'social'? Or had the case been handled by an overzealous civil servant for whom the law takes precedence in all circumstances?
The judge is bound by the law
Even if administrative tolerance is commendable, it is not enshrined in law. On the contrary: the Constitution even states that tax exemptions must be authorised by law.
The Antwerp Court of Appeal was therefore obliged to reject the appeal in both cases. It did not even have to assess whether the situation could be considered a business reason, as the exemption simply no longer exists.
In such situations, the principle of legitimate expectations is often invoked: if the tax administration consistently takes the same position with regard to a certain rule, the taxpayer is entitled to conclude that it will continue to do so. A few years ago, however, the Court of Cassation was quite strict in this respect, concluding that this principle could not take precedence over the law: the argument that the administration is instructed to apply the exemption for own homes even after 2014 if social reasons are proven is therefore unlikely to be accepted.
The minister is also bound by the law, is he not?
The Minister was recently questioned about this situation and on that occasion his attention was expressly drawn to the decisions of the Antwerp Court. It is a fact that administrative delays are still sometimes to be deplored: the Minister replied that his administration was not aware of any 'divergent applications of [administrative tolerance] or lack of unanimity on this subject in the case law'. He also stated that the tolerance will continue to be applied..
