Are you selling your property at a higher value than you think?

With interest rates for loans at a historic low in recent years, many Belgians have ventured to invest in additional property – saving for a rainy day, as it were. Investing in property is a wise choice that can be profitable in many cases, but we would like to point out to you that the tax authorities can still sometimes levy taxes on profits. The circumstances under which the tax authorities can take their piece of the pie are explained below.

1. Taxable capital gain on property
When does a person achieve a taxable capital gain on property or land located in Belgium?

If you sell developed property within five years of purchasing it at a profit, then you will be taxed on that capital gain. The reference period for this is the dates of the notarial deeds of sale and purchase. This capital gain is taxed at a rate of 16.5%. But if you wait longer than five years before selling the property, the capital gain is not taxable.

You will also be taxed on the capital gain if you sell land at a profit, with the tax authorities taking two periods into account: if you sell the land within five years of purchasing it, the capital gain is taxed at a rate of 33%, a rate that is halved to 16.5% if you sell the land between five and eight years after purchasing it.

The capital gain on the sale of developed property and/or land that is obtained as a gift is taxable if the sale takes place within three years after the instrument of gift is executed and within five and/or eight years of its purchase by the giver.

If you have constructed a building on land that you obtained for valuable consideration or as a gift, you will also be taxed on the capital gain if:

  • construction started within five years of obtaining the land for valuable consideration by the taxpayer or by the giver
  • the developed land is sold within five years of the date of the first time the building was occupied or rented out.

A brief summary:

The above tax rates do not include municipal tax.

2. So what exactly gets taxed?
How is the capital gain actually calculated?

The capital gain is not solely the positive difference between the purchase price and the sales price, and there are a number of concepts that must be taken into account.

  • The net sale value: this is the sale value less the costs incurred in accomplishing the sale, primarily estate agent fees but also expenses such as advertising. Should the sale value be less than the sum upon which VAT or the registration duties were levied for the sale, then the latter higher value is taken to be the sale value.
  • The fixed purchase value: the fixed purchase value is the purchase value plus 25% fixed purchase costs or the actual purchase costs if they exceed 25%. For every year between the purchase and sale, this value is raised by 5%. If you purchased property and had a professional constructor refurbish it, then those expenses can be added to the purchase value. Should you have received any compensation due to damage to the sold building, then that compensation will be deducted from the purchase value.

The positive difference between the net sale value and the fixed purchase value is the capital gain that will be subject to taxation. This calculation must be substantiated in your personal income tax return using a specific annexe.

3. Exclusions from the capital gains tax
In a number of cases capital gains tax is not payable:

  • Your own residence
    If you sell the residence that is your principal place of residence and that houses your family within five years at a profit, capital gains tax is not payable. You must however have occupied the residence for at least six months in the 12 months preceding the sale.
  • The sale of inherited property
    The capital gain on the sale of developed property or land within five or eight years that was inherited is not subject to taxation. Please note that if the tax authorities decide that the value of the property as listed in the inheritance tax declaration was too low, they can dispute this value for up to two years after the declaration is submitted.
  • Expropriated property
  • Property owned by minors, persons under provisional administration and persons without legal capacity.

4. Conclusion
In brief, we wish to emphasise that you must seek out all information in advance before engaging in property transactions involving property recently purchased or received. In a great many cases a considerable amount of capital gains tax can be avoided if you plan properly. So always seek the advice of an expert.

Our team is always available to answer any questions you may have in this respect.

A popular control structure
The all-powerful manager of a civil-law partnership: was it always a fiction?
The civil-law partnership has long been a popular control structure among wealth planners. In many cases, donors do not want to give up their assets entirely, and still want to retain some control over what they donate. Definitely in cases of transfers of family companies, the donors (often parents or family members) still want to retain control over the course of the business.  The advant
The tax framework
Company subsidies: exempted or not?
Various subsidies were briefly described in the article by our colleagues from Strategy and Operations. They explained that they can assist you and your company with guidance on subsidies, from A to Z.1 In this context, we would like to discuss the tax framework for subsidies: how are awarded subsidies treated tax-wise within companies? Are these subsidies exempt from corporation tax and, if
Right to deduct VAT possible for costs incurred during the purchase of shares
The Ryanair ruling
Right to deduct VAT also possible for costs incurred during the purchase of shares, if the purchase ultimately does not (fully) go ahead The European Court of Justice recently confirmed that VAT on costs incurred during the purchase of shares may be deductible even if the purchase ultimately does not (fully) go ahead. As such, the Court of Justice has upheld the principle that the preparatory t
What are the options?
The deduction for investment: an illustration of the options
The deduction for investment allows companies and natural persons who earn profits or benefits to reduce their taxable profits by placing part of the acquisition or investment value of investments in new tangible and intangible fixed assets. Depending on the size of your business and the nature of your activities, you can generally apply the regular, one-off deduction for investment of 20% (tem
Valuation of usufruct
Now also a witch hunt when usufruct is sold?
In previous editions, we have already written about the valuation of usufruct when purchasing property, but recently there have also been regular reports of checks on the valuation of usufruct when reselling. However, up until now, the case law has followed the viewpoint of the taxpayer. Brief description For several years, there has been a lot of controversy regarding the valuation of usufruc
Vlabel is using conciliatory language
Has the decrease in Flemish sales duty led to an increase in the costs for purchases of usufruct?
The decrease in sales duty: also for split purchase usufruct-bare ownership The recent drop in the rate (to 7.00%) for purchases of family homes comes with a number of conditions. For example, the purchaser must be a natural person. Following some uncertainty, it was subsequently confirmed that, in the event of a split purchase of such a property by a company for the usufruct and the bare owner f
The labour market of the future
Earn (on the side) flexibly and untaxed
There are three legal social statuses in Belgium, (i) employee, (ii) self-employed and (iii) civil servant. However, the question is often asked whether these classifications are still relevant to the rapidly evolving labour market in which flexibility is key and many people opt for a 'freelance status' or wish to combine several statuses. Voka has already called for a debate on the labour mark
Is there a notification requirement for your organisation?
Well begun is half done: Prepare your organisation for the go-live of the UBO register.
The register of ultimate beneficiaries (the "UBO register") will go live on 31 October 2018. In one of our previous newsletters we presented an overview of the general framework of the UBO register. The Royal Decree of 30 July 2018, published in the Belgian Official Journal of 14 September 2018, explains this register in detail. We’ve reviewed what your organisation needs to take into account.&n
One of the action points of the ATAD Directive
Impact of the implementation of the Belgian CFC legislation: the de facto tightening of transfer pricing rules?
From 1 January 2019 (fiscal year 2020), the newly introduced CFC rule will come into effect in Belgium, due to the implementation of the ATAD directive1. This new legislation must be interpreted within the broader framework of the Summer Agreement and the reforms within Belgian corporate taxation, which, like the CFC legislation, have resulted in part from the heavily discussed implementation of t
Brexit, e-commerce & VAT action plan are discussed
Pending changes in the area of international VAT
In the previous edition we discussed the expected changes in terms of VAT at a national level. In this article we will briefly consider the VAT changes that are expected internationally.                Brexit  In principle, on 30 March 2019, the ‘Brexit’ will finally be a reality. The United Kingdom will no lon

Subscribe to our newsletter