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.

Legally most correct solution
Successive usufruct: The Flemish Tax Office (Vlabel) confirms the method of levying the registration duties
On 10 December 2018, a remarkable position was published on the Vlabel website (Position no 18083 of 26 November 2018). The real estate tax system is becoming more and more sophisticated with more (tax) advantages. The question must therefore be asked whether the well-known "simple" usufruct will not be partially replaced by transactions with a double or successive usufruct. In the area of registr
From 1 January 2019
New Flemish Lease Decree
On 24 October 2018, the Flemish Parliament approved the new Flemish Lease Decree. In our newsletter of 26 October 2017, we already hinted at the changes that this new decree will bring about. One of the most important changes remains the decree's broad scope. On the one hand, extensive regulations are provided for the rental of a house intended as a main residence. What is new here is that the ter
Confirmed in writing to our office
Confirmed: both usufructuary and bare owner are to be included in the UBO register
The Belgian Ultimate Beneficial Owner (UBO) register went live on 31 October 2018. On the basis of the legal texts and the explanatory notes, as ultimate beneficiary/ies of companies, the natural person(s) who directly or indirectly hold(s) a sufficient percentage of the voting rights or of the ownership interest in this company must first be notified. A holding of at least 25% is an indication of
The advantage is a taxable benefit
Fiches and withholding tax on benefits granted by foreign companies
Should payments received from a foreign company be subject to withholding tax and should this be declared on a fiche? At the moment, the answer to this question is negative in most situations, but this is set to change. A new draft law dated 18 December 2018 provides for the introduction of a tax fiction that requires the (Belgian) employer of the beneficiary employee not only to withhold withh
The requirement to register gets a broader scope
More entrepreneurs must register with the Crossroads Bank for Enterprises (CBE)
Under the aim of creating a more attractive business climate, changes were made to the existing company law. In that context, the legislator has done away with the ‘trader’ concept, replacing it with the umbrella term ‘enterprise. Besides forming the basis for the rules of the Code of Economic Law, the Judicial Code and the Civil Code, the new enterprise concept also has consequences for reg
More specific: matrimonial property law
A new compensation obligation in the legal system
What if a spouse practices his profession in a company whose shares all form part of his separate property? The Act of 22 July 2018 has introduced considerable changes to matrimonial property law. This article addresses a specific addition to that law, namely the possible disadvantage incurred by the matrimonial property when a spouse practices their profession through their own company1. 
Changes in the cary proxy and usufruct
Estate planning: recent developments
Over the last few months, we have regularly reported on the important changes in estate planning and inheritance planning. Below is an update of some of those changes.   The care proxy: secure your estate for later The classic example is a person who, due to a physical or mental limitation (e.g. coma, dementia), is – temporarily or permanently – unable to manage their assets properly.
Happy Brexmas?
How to prepare your company for Brexit?
On 10 December 2018, the British Prime Minister decided to postpone the vote on the Brexit deal in the House of Commons. The risk of a ‘no deal’ disaster scenario is increasing. What are the important dates? On 29 March 2017, the United Kingdom formally informed the European Council of its intention to leave the EU (according to the procedure provided in Article 50 of the Lisbon Treaty). C
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

Subscribe to our newsletter