Floods: tolerances for donations and VAT
October 2021 – Donations are only tax deductible if a number of conditions are met. However, in the context of the floods that hit our country on 14 July 2021, the Minister of Finance has provided for some relaxations. But there are basic rules that must be respected in all cases.
Donations
First of all, it should be pointed out that donations have not been tax-deductible for individuals for several years. They are currently eligible for a tax reduction of 45% of the amount actually donated and mentioned on the certificate.
In the context of the pandemic, this tax reduction was increased to 60% for donations made in 2020, but this increase is no longer applicable.
Donations are also limited: the total amount of donations for which the tax reduction is granted can never exceed :
either 10% of total net income (for donations made in 2020, this percentage is 20%) ;
or 392 200 euros.
Donations are still deductible for corporate tax purposes. However, there are also limits to this: the deduction is limited to a maximum of 5% of total taxable profit before deduction of donations, with an absolute maximum of 500 000 euros.
Who do you donate to?
Many people think that a donation to a non-profit organisation automatically qualifies for a tax reduction. However, this is absolutely not the case. The beneficiary must be an approved institution.
Some institutions (universities and colleges, CPAS/OCMWs, the Red Cross, etc.) are approved by law. Others obtain their approval from the minister. The ministerial list contains some 2 500 institutions. Natuurpunt and the WWF are the best-known approved institutions, but many local bodies, such as animal shelters or palliative care networks, have also been approved and can therefore issue a tax certificate.
Finally, only cash donations are considered for personal income tax purposes. There is an exception for works of art, but it is rarely applied.
Specifically for the floods
If you make a donation to the Belgian Red Cross or to a PCSW in connection with the floods, you can certainly deduct this donation from your taxes. But beware: donations collected by the municipalities in the name of the municipal administration (and therefore not in the name of the PCSW) are not eligible for any tax reduction.
Cash donations to regional disaster funds do not in principle qualify for the reduction either, but the administration will accept them in exceptional cases.
However, there is no provision for an increase in the percentage of the tax reduction, as was the case in 2020. For companies, on the other hand, it is planned that the absolute maximum of 500,000 euros will be raised to 2.5 million euros for 2021. This relaxation does not seem to be accompanied by any conditions as to the use of the donation: the increased maximum applies even if the company makes a donation that has nothing to do with the floods.
VAT and reconstruction
The reduced VAT rate for renovation work is 6% (instead of 21%). There are, however, a few conditions that must be met: among other things, the house must be more than ten years old and it must be a renovation and not a reconstruction.
Specifically, if the house was less than ten years old or if the house has been completely destroyed, the 6% rate cannot be applied.
There is also a reduced VAT rate of 6% for buildings that are completely demolished and rebuilt by the client. However, partial demolition is not sufficient. Moreover, it must be a demolition, not a destruction by disaster.
The Minister of Finance has remedied this problem by allowing the reduced VAT rate of 6% applicable to a demolition with reconstruction to be applied to a reconstruction after a flood "where the residential building has not been completely demolished by the owner, but has suffered deep and irremediable damage as a result of the flooding, so that the essential structural elements of the old building are in danger". The other conditions relating to the reduced VAT rate applicable to a demolition with reconstruction are maintained. This means, among other things, that the dwelling must have been used for at least five years as the sole and proper dwelling and that the living area may not exceed 200 m².
