Is it (fiscally) appealing to gift immoveable property?

In 2015 the Flemish government drastically cut the gift tax rates on immoveable property. There was an almost immediate rise in the gifting of property, a trend that has continued in 2016, according to the figures. There are also plans for amending the inheritance and matrimonial property laws, while there have been proposals to cut the rates for inheritance tax for collateral relatives and between non-relatives. All these measures will undoubtedly lead to new and adjusted asset planning.

1. New rates have led to more gifts
As of 1 July 2015 the tax rates for gifts of immoveable property were reformed and reduced. Two aspects were subject to the reform: the categories for the recipients were simplified and the tax rates were cut. The scheme was later adopted by the Brussels Capital-Region and the Walloon Region, which introduced a number of (more limited) amendments.

The table below provides an overview of the new rates for gift tax:

For a residence worth €150,000 the rate is still 3%, while previously it could have amounted 10% (for direct line rates). If the residence was gifted to family members not in the ‘direct line’ the rate today will be 10%, while previously it could reach 65%.

An example further illustrates the changes:

A married couple, married under a regime of community of property comprising only of property acquired after their marriage, own an investment property that is worth €800,000 and wish to give it to their 2 children.

Under the former scheme, the gift tax would amount to €70,500, with each of the children consequently having to pay €35,250.

If the parents did not give them the property, and the children simply inherited it, total inheritance tax of €60,000 would be payable (if the parents died simultaneously), with each of the children having to pay €30,000.So simply leaving things be and letting the apartment be inherited in due course was around €10,000 more advantageous than gifting it. And so it made sense that very few people decided to give immoveable property away.

Under the new scheme, however, the total gift tax is down to €36,000, making gifts a lot more appealing.

The cut to the rates has now led to a considerable increase in the number of immoveable properties that are gifted. Until the close of last October over 15,300 instruments of gift were executed, for a total sum of 2.3 billion euros (source: Notaris.be), and a great many more gifts are expected to follow before the end of the year.

Flemish Minister of Finance and Budget Bart Tommelein has voiced his satisfaction, calling it a ‘win-win-win situation’, as it benefits citizens, the economy and the Flemish government. Now that immoveable assets are more frequently transferred while the owner is still alive, the revenues are also received by the Flemish authorities more quickly.

The cut to the rates has led to new opportunities for planning your assets, and making gifts of immoveable property is certainly worth considering. However, it remains an exercise where every case must be examined individually as, outside of the financial and tax aspects, there are numerous other factors that must be weighed up. Just a few examples:

  • what is the true individual situation?
  • what are your future expectations?
  • how many buildings do you own, what are they worth and will you purchase more?
  • what type of immoveable property is involved?
  • what is the age of the grantor and the recipient?

These are all questions that should first be discussed in a personal consultation before deciding on whether or not immoveable property should be gifted.

2. What does the future hold?
Aside from the reduction of the gift tax, steps have also been taken to update our inheritance law, and there have been proposals to cut the high inheritance taxation, especially rates for collateral relatives and between non-relatives.

For further information, you can always contact our Estate Planning team.

What are the consequences and the opportunities?
Buying real estate in the Netherlands: are there tax benefits?
In recent years the purchase of property in the Netherlands has seen an uptick, especially in the beachside town of Cadzand, where 1,500 new apartments and houses are being be built between 2008 and 2020. This is the perfect opportunity to examine the (tax) consequences of buying real estate in the Netherlands and the opportunities it offers in respect of asset and inheritance planning. This artic
A reminder of the most significant tax-related points
‘For free’ is not always ‘VAT-free’
 ‘A free sample, a gadget with a corporate logo, rewarding faithful buyers and suppliers with a small gift…’ Every company is familiar with this situation, but are they also aware of the tax-consequences of these generous gestures? The tax authorities recently published a circular as a reminder of the most significant tax-related points for attention in this respect.  The rules&
A refresher on the current state of affairs
Interest on savings accounts with foreign institutions: Belgian rapped over the knuckles again for its exemption
With tax return season lurking on the horizon it is a good idea to have a refresher on the current state of affairs with respect to the exemption for interest on savings accounts. The general rule as regards the exemption At the present, the first bracket of €1,880 (for tax year 2018, base sum of €1,250) of the income from regulated savings accounts (those accounts where the bank complies
The regional benefits have diverged completely
Home-owner taxes in the tax year 2017
'Own homes' have been a regional authority matter, since 2014. Even then, it was predicted that this would result in serious fragmentation and complication of the fiscal benefits for own homes. 
Powerful weapon for combating against fraud
Prejudgement administrative attachment for VAT gets repackaged
One of the measures used in the battle against tax fraud involves the amendment of the extant regulations for prejudgement attachments that VAT officials can levy on moveable property when, during an inspection, they have established that there are matters that indicate major fraud (organised or not). An example would be when they encounter goods in a warehouse that have been part of a carousel sc
There are a number of (negative) consequences
What happens if a tax audit decides that your company is no longer ‘small’?
From a tax perspective there are a number of advantages to a company being considered ‘small’. In this article we will take a brief look at those advantages. However, there are also considerable consequences when, during a tax audit, a company is deemed to no longer be small, and these not only affect the company itself, but others too.   A small company under article 15 of the Compani
The published circular creates clarity
Are fundraising dinners VAT-liable? We clear up the exemption for charitable support
When a VAT-exempted society decides to host an event for the purpose of raising funds, such as a fundraising dinner, it was often uncertain as to whether the event was exempt from VAT. In the wake of a legislative amendment in 2016 a circular has now been released to clear up matters. Introduction The VAT Code contains an exemption for the delivery of goods and services provided by specified s
The struggle against fiscal fraud
FATCA: Prevention is better than reclamation
The US Foreign Account Tax Compliance Act (FATCA) has been in effect since 1 July 2014. The law is part of the war on tax fraud and is aimed at tackling international tax avoidance by American citizens through a new system of global automatic data exchange. What obligations have been introduced under FATCA? Under FATCA certain identification, reporting and/or content obligations are imposed f
Limited to federal & Flemish regulations
Target group reductions for social security: Are you still aboard?
As a result of the 6th state reformation, the Regions now have the authority to oversee personal target group reductions (doelgroepverminderingen) in respect of the employer’s contribution to social security. Flanders has opted to simplify the target group system, as a result of which a number of existing measures have been scrapped and new target group reductions have been devised for the young
Good news for separated parents with kids in college
Joint parenting for tax purposes: children of age also count
At the start of this year the authorities published a circular explaining the amendment to the article allowing joint parenting for tax purposes to now also be applied to children of age.

Subscribe to our newsletter