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.

A brief summary
What should be expected in relation to (national) VAT?
Despite the fact that many of us are still in summer (holiday) mode, this article is going to focus on the VAT changes that we could expect in the not-too-distant future. It will provide a brief summary. For a more in-depth examination, you can always contact our VAT team.  Vouchers (1 January 2019)  In June 2016, Europe set out the VAT process for vouchers (Directive (EU)2016/1065 o
What are the consequences?
Vlabel overruled by the Council of State in the case of split acquisition and registration of bare ownership and usufruct
After years of dispute between taxpayers and the Flemish Tax Office (Vlabel), the Council of State has quashed Vlabel's position on split acquisition and split registration. Here below we explain where the problem lies and what the consequences of the decision of the Council of State are in practice. The problematic situations Two kinds of situations were targeted by the position of Vlabel. Th
Depends on the nature and frequency of the violation
Fine levels set for non-compliance with transfer pricing documentation obligation
From tax year 2017 and, more specifically, the implementation of the mandatory transfer pricing documentation obligation, there was an immediate indication that, from a second violation of non-compliance with the transfer pricing obligations, a fine of between 1,250 EUR and 25,000 EUR (Article 445, §3 Income Tax Code 1992) could be imposed. The scales of the administrative fines and their appl
The FAQ contains no fewer than thirty-one questions
FAQ published regarding the Innovation Income Deduction (IID)
On 26 July 2018, the FPS Finance used Fisconet - you can registrate for free to consult the list of FAQ - to publish the long-awaited list of Frequently Asked Questions (FAQ) regarding the Innovation Income Deduction. Since the law of 9 February 2017, introducing the Innovation Income Deduction, there now follows the first additional comments concerning the legal provisions of Art. 20
Property planning finds itself in turbulent waters
Valuation of a usufruct: in complete (r)evolution?
Much has been said and written in the past few years about the valuation of a usufruct and where the fiscal shoe pinches. An overview of valuation problems, current trends and a look at future property planning is provided below. Valuation of a usufruct Valuation of a usufruct: a changing world Usufruct is one of the oldest property rights known and was already applied in Roman times. Usufr
This difference in treatment needs to be corrected
Benefit in kind on immovable property: tax authority abides by the court ruling (for now)
The Federal Public Service Finance published Circular 2018/C/57 on 15 May 2018 on the flat-rate valuation of the benefit in kind for providing an immovable property or a part of an immovable property free of charge to employees or managers. The flat-rate estimate of these benefits is laid down by the Royal Decree implementing the Income Tax Code 1992 (RD/BITC 92). The Courts of Appeal of Ghent and
The 'use and enjoyment" rules explained
Freight transport and closely associated services: new rules clarified in a circular
On 31 October 2017, (previous) Royal Decree No 57, which deals with the freight transport services Department and related services, was replaced by a new RD which came into force on 23 November 2017. It clarifies the former RD in part while introducing a new rule. In order to clarify and discuss the (new) rules, the tax authorities published an administrative circular in this regard on 31 May 2018
Guidelines
Substantial changes in the obligations for partnerships
The Company Law Reform, published on 27 April 2018, is making a number of changes in the Companies Code and the Code of Economic Law. These new regulations will enter into force on 1 November 2018. A few rules will also change for partnerships. Although some clarifications will still be published, we would already like to provide the following guidelines. Changes in the Companies Code A first
Quickly detect system risks
Without a Legal Entity Identifier your company will not be trading on the stock market in 2018
  As from 3 January 2018, every legal entity that buys or sells financial instruments must have a Legal Entity Identifier or LEI. Legal Entity Identifier A LEI is a 20-digit alpha-numeric code enabling quick identification of legal entities that are active on the (international or local) financial markets. The LEI enables regulators to quickly detect system risks. Registrati
A summary of the main points
Immovable property leases to include VAT
  Although currently there is just a draft bill on this issue, which obviously can be subject to change in the meantime, we would like to summarize the main points of the upcoming revolution in the VAT landscape: immovable property leases may become subject to VAT. History Until recently, immovable property leases have – in principle – been exempt from VAT (section 44, paragr

Subscribe to our newsletter