VAT rate on demolition and reconstruction:
temporarily lowered to 6%.
Until now, the reduced VAT rate of 6% for conversion work only applied if the dwelling WAS NOT completely demolished. There has been an exception to this rule for almost ten years, but it is limited to certain areas in Belgium (thirty-two in total). In these areas, demolition and subsequent reconstruction do benefit from the 6% rate. The government has decided to extend this exception to the whole territory of Belgium.
Transformations
In principle, all operations concerning construction and conversion are subject to a VAT rate of 21%. There are, however, a few exceptions to this rule, the most important of which is that applicable to conversions which meet three conditions, namely :
the dwelling is more than ten years old ;
it is used exclusively as a private dwelling or only "incidentally" for your profession;
the work (transformation, renovation, rehabilitation, improvement, repair, maintenance) is invoiced directly to the end user (owner or tenant).
In principle, the rate applies to both materials and their placement, but the purchase of materials and their placement must, however, be carried out by the same contractor. You cannot claim the 6% VAT rate on the purchase of your materials from the local DIY shop, even if your contractor will place them.
Demolition and reconstruction
The tax authorities - supported by case law - do not regard demolition followed by reconstruction as transformation. In doing so, the tax authorities take into account the extent of the alterations and the relationship between the value of the house and the alterations.
However, in order to combat certain urban cankers, it was decided in 2007 to also apply the VAT rate of 6% in the case of demolition followed by reconstruction in certain areas. This concerns thirty-two cities and areas, including Antwerp, Sint-Niklaas, Charleroi, Ghent and Liège.
The government plans to maintain this system.
Enlargement to private owners
The Federal Government's agreement shows that, in addition to the existing system, the government will also reduce the VAT rate to 6% for demolition followed by reconstruction provided that the following conditions are met :
the client is a natural person;
the reconstructed dwelling must be intended for the owner's dwelling, which means that the owner must himself immediately occupy the dwelling and cannot rent it out;
the occupation obligation is maintained for five years. If the building owner does not occupy the house for five years, he will have to pay back the VAT savings on a pro rata basis;
the rebuilt house is the only house and the owner's own home;
the total living area of the reconstructed dwelling may not exceed 200 m2.
These conditions are stricter than those provided for the reduced rate in the thirty-two zones.
There is only one exception to the condition that you, as the building owner, must occupy the dwelling yourself and therefore cannot rent it out, namely when, on completion of the work, you rent out the dwelling to a social estate agency. However, this condition must be met for 15 years.
The condition concerning the maximum surface area does not apply in this case.
The reduced rate also applies to the delivery of a building (this is not currently the case in the thirty-two cities). Rather than occupy the dwelling himself, the client can immediately sell it. This sale can also take place at the VAT rate of 6%, provided that the buyer respects the conditions in terms of occupation, single dwelling, surface area, etc. Thanks to this exception, property developers can also demolish a dwelling and rebuild it and then sell it at the rate of 6%.
The reduction in VAT is also intended to support the construction sector during the first years following the coronavirus crisis. This is why it is a temporary measure: VAT must become payable between 1 January 2021 and 31 December 2022, and no later than 31 December of the year in which the dwelling is first occupied.
The fact that the demolition/reconstruction started before 2021 does not pose a problem: VAT that becomes chargeable in 2021 can still benefit from the reduced rate.
