Quick overview of Belgian Real Estate

Preliminary Remarks
This guide was updated on 31  December 2023 and cannot be considered as being an exhaustive and detailed list of applicable measures to Real Estate transactions.

Rental Income and Capital Gains of Belgian Real Estate

*The cadastral income is the (theoretical) average net income that the real estate property should produce in one year.

Rental Income 

Individuals 

Introduction

Taxation of rental income depends on the use of the property: private habitation or professional purposes.

Liability to Tax 

Income from real estate is subject to personal income tax. 

Basis to Tax

When the real estate is rented to an individual who uses it for private habitation purposes, personal income tax will be calculated  on the basis of the indexed cadastral income increased by 40%. The cadastral income is determined by the Belgian government and is estimated as the “normal” net annual income of any property. 

When the real estate is rented to an individual who uses it for professional purposes (e.g. the premises is rented for business purposes) or rented to companies, the taxable income is the total amount of the rent and rental benefits decreased with fixed costs equal to 40% of the rental income (with a minimum threshold amounting to the cadastral income increased by 40%).

Taxable basis for non-furnished buildings (not land) rented out for professional reasons:

• Indexed cadastral income, increased with 40%
• +Rental excess

Rental excess: total amount of the rent and rental benefits - lump sum costs with a maximum of 40%.

Lump sum costs of 40% cannot be higher than 2/3 of the non-indexed, revalorised cadastral income. 

Companies

Introduction

As a general rule, a Belgian resident company is liable to corporate income tax (under Belgian tax law, accounting law supersedes tax law unless otherwise expressly provided by tax law. As a result, the taxable base of a resident company is calculated on the basis of its annual accounts) on its worldwide income, including income derived from real estate. This also includes tax disallowed expenses and distributed dividends. 

Liability to Tax 

Rental income earned by companies is subject to corporate income tax.

Basis to Tax

Income is taxed at the standard corporate income tax rate of 25%. Under certain conditions (amongst others – being a SME), a reduced corporate income tax rate of 20% may apply on the first €100,000 of income. 

Capital gains

Individuals

Introduction

As a general rule, capital gains realised by individuals on real estate are in principle not subject to personal income tax, but are taxed at a flat rate (0%, 16.5% or 33%) depending on the elapsed time between the acquisition of the property and the realisation of the capital gains and the type of property that is being sold. 

Liability to Tax

Capital gains realised by individuals may be subject to personal income tax under specific circumstances (a certain level of labour or entrepreneurial activities and outside the normal management of private assets). In that case, up to 50% progressive tax rates applies for professional activity versus separate fixed tax rate of 33% in case of non-professional activity, but speculation can be invoked by the Belgian tax authorities.

Basis of Tax

The general principle is that capital gains that are realised on real estate are subject to personal income tax if the real estate is sold within 5 years after being acquired. If this is the case, capital gains are subject to personal income tax at a flat rate of 16.5% (to be increased with a crisis contribution and communal taxes). However, specific rules apply depending on the situation, e.g. real estate built by the individual, real estate built on a plot owned by the individual for over 5 years, etc. 

Capital gains realised on a building plot are subject to personal income tax at a rate of either 16.5% or 33% depending on the elapsed time between the acquisition of the real estate and the realisation of the capital gains (respectively if the property is sold between 5 and 8 years after being acquired or within 5 years after being acquired). Capital gains realised on building plots more than 8 years after acquisition are not subject to taxation.

In principle, there is no taxation on realised capital gains in case of expropriation of the property, acquisition through inheritance or donation or in case it concerns the sale of the own home (i.e. the house occupied by the individual himself). However, specific rules and conditions should be considered in this respect. 

Companies

Introduction

As a general rule, a Belgian resident company is liable to corporate income tax on its total worldwide income, including capital gains realised on real estate. 

Liability to Tax

Capital gains realised on real estate are subject to corporate income tax.

Basis to Tax 

Capital gains are taxed against the standard corporate income tax rate of 25% (as of 1 January 2020. Under certain conditions (amongst others – being a SME), a reduced corporate income tax rate of 20% as of 1 January 2020 may apply on the first €100,000 of income.

Exemptions

Provided that certain conditions are met, companies may benefit from a tax deferral regime ("taxation étalée des plus-values"l"gespreide belasting op meerwaarden")  (Note that individuals may also benefit from this regime on capital gains realised on real estate used for business purposes). 

This regime allows the seller to spread the tax charge following the depreciation period of the newly acquired asset by way of reinvestment of the sale price of the asset on which the capital gains have been realised. 

Belgian VAT & Transfer Taxes

Value-Added Tax (VAT)

Individuals

Introduction

Value-added tax is a tax based on consumption. VAT is levied at each stage of the supply chain. 

Liability to Tax

If an individual performs, independently commercial or professional activities in Belgium on a recurrent basis which are subject to VAT, he/she is a taxable person and should, in principle, register for VAT. However, the individual who occasionally sells "new" buildings can opt for the status of occasional taxable person for VAT purposes.

The rent of immovable goods is in principle VAT exempt with some exceptions (e.g. rent of furnished accommodations, parking spaces, short-term rents, etc.). 

However, in a B2B situation, there is an option to tax (apply VAT) for immovable rents, under specific conditions.

Basis of Tax

As a rule, the sale and renting (longer than 6 months) of real estate located in Belgium is in principle exempt from VAT, but a number of exceptions apply. The sale of real estate qualifying as “new building” may be subject to VAT. For VAT purposes, a building is deemed to be “new” until 31  December of the second year following the year during which the building was occupied for the first time.  The standard applicable VAT rate is 21% (unless reduced rates apply). 

Interaction with Transfer Tax

Consequently, when the sale of real estate is VAT exempt, registration duties will apply. In case VAT is charged because a newly created building is sold within two years following its first occupancy and the seller has opted for VAT or the seller is a professional real estate company, the transfer will be subject to VAT and  as a consequence registration duties will not apply.

Since 1  January 2019, it is possible to opt for the application of VAT to the renting of a building built (or significantly renovated) as from 1  October 2018, in B2B situations. Both the lessor and the lessee will have to agree that VAT will apply on the rent (and other specific conditions must be met). In that case, the lessor will charge VAT on the rent and can deduct the input VAT on the purchase or construction of the building. 

The lessor will have to register for VAT and charge VAT to the lessee. The lessee can deduct this VAT on the rent if he uses the building for VAT taxable activities (VAT revision period for real estate is, in this case, 25 years).
 

Companies

The same rules as for individuals apply.

Transfer Taxes

Individuals

Introduction

Registration duty is a tax on the transfer of real estate from one person or company to another. 

Liability to tax

Unless VAT applies, the sale of Belgian real estate is subject to the transfer tax on real estate, due by the purchaser. 

Basis of tax

As a rule, the sale in full ownership will be subject to a 10% or 12% (Flemish region) or 12.5% (Walloon and Brussels region) registration duty depending on the region in which the real estate is located. The registration duty is in principle calculated on the contractual transfer value of the real estate or its market value, whichever is higher.  

Exemptions

Various reduced rates apply depending on the region in which the real estate is located (e.g., the acquisition by professional real estate or the purchase by individuals of small dwelling for which the cadastral income does not exceed a given threshold). 

Companies

The same rules as for individuals apply. However, note that under certain conditions contribution of real estate to a Belgian company is not subject to registration duties except if the real estate is used for private habitation purposes. Specific rules apply to the transfer of real estate in case companies are in business restructuring. 

Local taxes

Individuals

Introduction

Regions levy an annual real estate tax on real estate located in Belgium. 

Liability to tax

The annual real estate tax levied annually by the regions by way of assessment is due in the hands of the owner, usufructuary or beneficiary of other rights in rem. 

Basis of tax

The real estate tax is based on a percentage of the indexed cadastral income. The applicable percentage depends on the region in which the real estate is located (1.25% in Walloon and Brussels regions and 3.97% in the Flemish region). Besides the regional real estate tax, significant additional local taxes are levied by provinces and municipalities.

Exemptions

Various reduced rates and exemptions can apply depending on the region in which the real estate is located. 

Companies

The same rules as for individuals apply. However, note that the real estate tax is deductible for tax purposes as a business expense. 

Vehicles for Belgian real estate

Commonly Used Vehicles for Belgian Real Estate

The public limited company ("société anonyme"l"naamloze vennootschap") and the private limited liability company ("Société a responsabilité limitée"/"Besloten Venootschap") are the most commonly used unregulated vehicles for Belgian real estate.
All income earned by a Belgian company is subject to corporate income tax up to 25%. Distributed dividends are subject, in principle, to a 30% withholding tax. Specific withholding tax exemptions and/or reductions based on domestic law and the EU Interest and Royalties Directive/double tax treaties may apply provided that certain conditions are met.
 

Partnership & joint ventures

For Belgian tax purposes, there is no distinction between the taxation of partnerships and joint ventures.
Partnerships & joint ventures in Belgium may take various forms (purely contractual or a form of a company). It should be noted that there is no specific legislation in Belgium for joint ventures. For example, contractual joint ventures can refer (i) to General partnership (so-called in Belgium "société simple / Burgelijke vennootschap") - without separate legal personality. The general principles of company law will be applicable for corporate vehicles without a separate legal personality. Benefits and losses will be directly allocated to the partners. Joint Ventures can also take the form of a (ii) company with limited liability of its shareholders. At this regard, these companies are subject to Belgian corporate income tax like other Belgian companies.
 

Transparent partnerships

Partnerships can be structured as tax transparent entities. The profits and losses will hereby be allocated directly to the partners. This structure avoids multiple-level taxation. Example of the transparent vehicle is the European Economic Interest Group ("Groupement Européen d'lnteret Economique"/ "Europees economisch samenwerkingsverband").

Trust

The concept of Trust is not known under Belgian law. However, Belgium has implemented a so-called “Cayman tax”; this tax is a set of rules in order to tax by transparency the income of the Trust (only the “Settlor” is taxable). Moreover, in principle, distributions made by the Trust to a Belgian resident are qualified as dividend and taxed as such. 

Specific Real Estate Vehicles

Regulated Real Estate Company (RREC) 

The Regulated Real Estate Company (“Société Immobilière Règlementée”/ ”Gereglementeerde Vastgoedvennootschap”) is defined as a company incorporated for an undefined period of time whose main activity is to make buildings available to users, either directly or through a company in which it holds share participation. The REEC is subject to the supervision of the Financial Services and Markets Authority (“FSMA”). 

The RREC must be incorporated under the corporate form of a public limited company or a limited partnership (“société en commandite ”/”commanditaire vennootschap ”), and have a minimum share capital of €1,200,000.

Under Belgian law, the REEC must invest a maximum of 20% of its consolidated assets in real estate properties which form a single real estate complex. Also, an assessment of its property assets on a quarterly basis by valuation experts is required. Furthermore, the REEC is subject to a yearly distribution obligation of at least 80% of the corrected profit. 
From a corporate income tax point of view, provided that certain conditions are met, the RREC is entitled to benefit from specific rules, including an exemption from corporate income tax (except on disallowed expenses for tax purposes and abnormal or benevolent benefits) and from a reduced withholding tax rate. 
 

Specialised Real Estate Investment Fund (SREIF)

The Specialised Real Estate Investment Fund (“Fonds d’Investissement Immobilier Spécialisé”/”Gespecialiseerd Vastgoedbeleggingsfonds”) is a closed-end non-transparent fund, incorporated for a limited period of 10 years with extension possibility, whose main activity is to collectively invest in real estate (broadly defined) for institutional and professional investors. Unlike the RREC, the SREIF itself is not subject to supervision of the Financial Services and Markets Authority, but only a registration with the Ministry of Finance is required. However, the Belgian Ministry of Finance is competent to monitor the respect of the legal obligations of the FIIS.
As the RREC, the SREIF is subject to a yearly distribution obligation of at least 80% of its corrected profit. With respect to accounts, the SREIF must draw its financial statement under IFRS standards. 

Similar to the regime applicable to the RREC, the SREIF benefits from a specific corporate income tax regime both in the hands of the SREIF and in the hands of the investors. From a corporate income tax point of view, provided that certain conditions are met, the SREIF is entitled to benefit from specific rules, including an exemption from corporate income tax (except on disallowed expenses for tax purposes and abnormal or benevolent benefits) and from a reduced withholding tax rate. 
Basically, an exit tax of 15% is due upon entering the specific taxation regime of REIFs. An additional 10% exit tax may apply in case of exiting the scheme or in case of selling within 5 years the shares acquired following a contribution.