While the Belgian government last minute abandoned this optional VAT system for immovable letting in the framework of last year’s budget discussions, it took the idea back on board and reached an agreement this weekend on the possibility to apply VAT on immovable letting.

We are still awaiting for definitive guidelines / texts, the main principles of the regime that will likely become applicable as of 1 October 2018 are the following:

  • The optional VAT system will be applicable on immovable lettings of ‘new’ or ‘buildings renovated in such a degree that they become new” (and accompanying land) as of 1 October 2018;
  • The option to apply VAT will need to be agreed upon by both the landlord and the tenant;
  • The option to apply VAT will be valid during the entire lease;
  • An extended VAT adjustment period of 25 years (instead of the normal 15 years) will be provided for;
  • Short-term leases (i.e. maximum 6 months) of buildings/lands will in any case trigger VAT (both in B2B as B2C context) with certain exceptions (among other for social purposes).

The introduction of such an optional VAT system could be beneficial for all actors in the real estate industry in Belgium. VAT paid on construction and operating costs which previously had to be considered as a ‘non-deductible cost of the building’ will now in many situations become recoverable.

There is still a long way to go and conditions will likely be fine-tuned along that process. We will keep you updated and remain at your disposal in case of any questions.