Reduced 12% VAT rate will now also apply to private initiatives for social housing

Since 1 January 2017 the focus of the reduced 12% VAT rate in social housing has been further extended, and from now on any private investor, natural person or legal entity can – under certain conditions – enjoy the reduced VAT rate if the accommodation is ultimately intended for rental within the framework of social housing. 

1. Existing lower VAT rates for social housing remain in place 

There were already reduced VAT rates of 6% and 12% for the formation, sale and the transfer and retransfer of commercial rights from or to (new) private housing and housing complexes designated for rental within the framework of social housing. Work performed on immoveable property (including both old and new housing) and property finance leasing was also envisaged. 

However, in order to gain from these reduced VAT rates, the transaction must be invoiced to either:

  • Regional housing companies or housing funds, in which case the reduced VAT rate of 6% applies.
  • Provinces, municipalities, intermunicipal cooperative societies, public social welfare centres (Openbaar Centrum voor Maatschappelijk Welzijn – OCMWs) and accredited institutions such as psychiatric care facilities, residential care homes, etc, in which case the reduced VAT rate of 12% applies. 

While these reduced VAT rates still apply, as of 1 January 2017 the scope of the 12% VAT rate has been extended to include private initiatives. 

2. 12% VAT rate for private initiatives for social housing 


Nature of the transactions

The extension of the reduced VAT rate still covers the same transactions (formation, sale and the transfer and retransfer of commercial rights, work on immoveable property and property finance leasing), but from now on these transactions can be invoiced to any party, including private persons, at 12% VAT if the other conditions are fulfilled. 

The reduced VAT rate can under no circumstances be applied for work on immoveable property that concerns agricultural activities, landscaping and fencing, nor swimming pools, saunas, tennis courts, mini-golf courses, etc. Cleaning buildings is likewise subjected to the standard 21% VAT rate. 

Designated use of the housing

Only transactions that concern private accommodation and housing complexes that are rented within the framework of social housing are eligible. In reality this means that the recipient, commissioning authority, owner or lessor must:

  • Either rent out the accommodation or housing complex to a legal entity under public or private law, which in turn rents out accommodation for social housing;
  • Or must rent out the accommodation or housing complex itself within the framework of a management mandate that was entered into with a legal entity under public or private law.  

A legal entity under public or private law means those legal entities that could already enjoy a reduced VAT rate (6% or 12%) before 1 January 2017 (see above), but now also includes autonomous municipal companies (autonome gemeentebedrijven - AGBs), social housing rental companies (sociale verhuurkantoren - SVKs) and in a more general sense all recognised legal entities under public or private law that serve a social purpose.  

Minimum rental period

To receive the reduced VAT rate, the rental period cannot end before 31 December of the fifteenth year after the first year in which the accommodation or housing complex was first occupied. This rental period must be set down when the rental agreement or the management mandate commences.  

If this rental period is not adhered to, the beneficiary of the reduced VAT rate shall lose that gain (in most cases being 21% - 12% = 9%) for the year in which the minimum rental period is no longer honoured as well as for any remaining years of that fifteen year minimum period. That means that the reduced VAT rate is actually a provisional tax benefit, 1/15th of which is permanently acquired at the conclusion of each calendar year, starting from the year after first occupation.  

Formalities

A number of formalities must be fulfilled, both on the part of the buyer, the commissioning authority or the lessee as well as on the part of the seller, service provider or lessor (as the case may be).  

For the buyer, the commissioning authority or the lessee the formalities are as follows:

  • A declaration that the accommodation of housing complex shall be designated for rental within the context of social housing (or a management mandate therefore) must be submitted to the relevant tax inspection office. This declaration must be submitted before the VAT becomes payable and a copy must also be provided to the seller, service provider or lessor. This requirement does not apply to work on immoveable property that concerns existing housing. In that event the owner or principal tenant must only provide a copy of the rental agreement to the service provider. Except in cases of collusion, this declaration discharges the seller, the service provider or the lessee of its liability with respect to the applied reduced VAT rate.
  • A copy of the rental agreement concluded with the legal entity under public or private law must be presented to the relevant tax inspection office within one month of it being signed. 

The seller, service provider or lessor must primarily pay attention to the content of its invoice. The following must, inter alia, be stated on the invoice:

  • The date and reference number of the rental agreement as well as the particulars of the relevant tax inspection office for the buyer, commissioning authority or lessee.
  • It is recommended that reference is also made to the applicable statutory provision that justifies the reduced VAT rate of 12%: ‘Uitvoering van werken die zijn bedoeld in rubriek XI van Tabel B van de bijlage bij Koninklijk Besluit nr. 20 – Huisvesting in het kader van het sociaal beleid – Privé-initiatief’ (‘Performance of work within the meaning of section XI of Table B of the schedules to Royal Decree no. 20 – Housing within the framework of social policy – Private initiative’).

A copy of the invoice must likewise be provided to the tax inspection office no later than on the final workday of the month following the month in which the invoice should have been issued.  

3. What about other reduced VAT rates?


For work on immoveable property that is performed on existing private housing that is older than 10 or 15 years, the reduced VAT rate of 6% could be applicable if the relevant conditions are met. This VAT rate is more advantageous and also entails fewer formal obligations. It is likewise required that the end-user is invoiced for the work, which in the present scenario would not be the case. But in the past the condition has been loosely interpreted so that not just the tenant but the owner too could enjoy the reduced VAT rate. It will be interesting to see if this interpretation remains valid.  

4. Is it for you? 

The primary aim of the measure is to make up for the shortfall in social housing. For a legal entity under public or private law the measure could provide greater financial breathing space. The measures already in existence, in spite of the reduced rates, still entailed considerable tax costs, as in many cases the VAT was not deductible. It is hoped that the improved VAT rates for private investors will create a wider range of rental housing that can be used for social housing. After all, renting such housing is VAT-free. Moreover, the authorities will be faced with less pressure to solve the social housing problem through their own investments, where spreading the cost is often impossible. For the private investor the reduced rate means that VAT expenses will be limited (12% instead of 21%).  

The basis for lifting the Swiss banking secrecy
Belgian-Swiss double taxation convention Amendment takes effect
On 10 April 2014 Belgium and Switzerland signed an Amendment of the Convention on preventing double taxation for taxes on income and on assets. This Amendment entails a number of significant innovations. For example, the Amendment contains an article on exchanging information within the double taxation convention between Belgium and Switzerland, with this provision being the basis for lifting Swis
The basic requirements appear to be identical
The new insolvency law will also affect those in liberal professions
Insolvency of companies Minister of Justice Koen Geens is steadily moving forward, and after a comprehensive overhaul of the Companies Code and the codification of the company law in the Economic Law Code, we are now set for the codification and updating of the insolvency law. The Law of 11 August 2017 saw a brand new and rather hefty Book XX added to the Economic Law Code, ‘Insolvency of compa
Establishing, requirements and consequences of a VAT group
How the Summer Agreement affects VAT groups
Establishing a VAT group in order to avoid losing the right to deduct input tax on the grounds of renting out immoveable property It is a regular event for a company (such as a real estate company) that is part of a group of companies to buy or build property, which it then makes available for use by another of the group’s companies (such as an operating company). The latter company will then p
Important things and pitfalls to consider
Working with self-employed persons: things to consider for cooperation agreements with self-employed persons
For most companies it is a daily part of life to work together with independent service providers and it is a highly flexible and easy form of cooperation.
A two-stage rocket: 2018 & 2020
Summer agreement: What will change for corporation tax?
You will no doubt have discovered from one of the many news stories that the federal government reached an agreement on 26 July 2017 on the corporation tax overhaul and its decreased rates. Other measures resulting from this ‘summer agreement’ are the tax on securities accounts, the expansion of flexible jobs, the option to make the rental of property subject to VAT and the reform of the tax o
Measures concerning self-employment, penalties, savings & flexible jobs
Summer agreement: more than corporation tax alone
You will no doubt have discovered from one of the many news stories that the federal government reached an agreement on 26 July 2017 on the corporation tax overhaul and its decreased rates. Other measures resulting from this ‘summer agreement’ are the tax on securities accounts, the expansion of flexible jobs, the option to make the rental of property subject to VAT and the reform of the tax o
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 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. 
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&

Subscribe to our newsletter