There are many real estate properties in companies: family homes and second homes, on the coast or abroad. The entrepreneurs are charged a benefit in kind, a cost that weighs heavily, and so more and more entrepreneurs choose to take the family home out of the company. How can they do this? A question for David Lornoy.

That benefit in kind is a high cost. Why is that so expensive?

At the time of the Di Rupo government, that benefit in kind has increased dramatically. The benefit in kind is calculated on the basis of a number of parameters. The basic parameter is the cadastral income, which is multiplied by a multiplier. The Di Rupo government has increased it to 3.8, which is almost a doubling of the previous multiplier.

That formula is still used today?

This formula is still used today, on the understanding that this formula is actually unconstitutional in the sense that the benefit in kind is calculated differently when the property is made available by an individual or a company.

So a kind of discrimination?

Indeed! We now have a lot of cases with the tax authorities where we are trying to find a solution, taking into account this unconstitutionality. In most cases, it is proposed to appoint an estimator and a market value is chosen that must of course be lower than the benefit in kind.

That's how you have an objective judgement?

Yes! I have two further comments to make on that topic. In practice, we notice that the registered office of the company is usually located in the family home and that a benefit in kind is still charged for the entire home. That is not entirely correct, because the fact that the seat is there also means that correspondence will go there and that at least a certain space in the house must be provided where that correspondence must be processed. So there is an advantage in all nature for the entire property is a bit too much.

On the other hand, we also notice that people are charged a benefit in kind and then think that all costs can be deducted. Of course, that is not the case. The normal maintenance and repair costs remain at the expense of the user of the dwelling and are not included in the benefit in kind. When the company pays this cost, a settlement must therefore be made at the actual value in favour of the user.

Do you advise entrepreneurs to take that property out of the company anyway, because that is safer?

Of course, we have to do the whole exercise, because there is also a whole cost involved. First and foremost, there is a capital gains tax, because the property leaves the assets of the company and that company must, of course, get the market value for that. On the other hand, the family home seems to us to be better than a private one. The fact that it is separate from the business risk and, moreover, the inheritance of the family home between spouses is tax-free.

Are there any alternatives? I am thinking of the company that rents the house to the manager, can this be done and is it allowed?

That is perfectly possible! The question that is asked there is which rent should be charged. Is a market rent sufficient or should one charge a rent based on the benefit in kind? In principle, our code says that when there is an advantage, one should look at the formula. When a market rent is paid, there is actually no advantage. Of course, this is not the position of the tax authorities.

Is there a difference between the buildings of NVs and BVBAs?

Not immediately in the field of taxation. An exception is the registration tax. This will always be the selling right for NVs, 10% in Flanders. For BVBAs in the context of a liquidation or a capital decrease, one can fall back on the general fixed fee or the distribution fee of 2.5% in a number of scenarios.

Some say that the entrepreneur is still free to choose his remuneration. One wants a wage, the other a home.

That is the theory of remuneration to which you refer. This is a theory that is gaining ground in the press today. It can be applied perfectly. It is a way of remunerating, but it is not the case that it is stated on the sheet that, as a result, all costs are automatically deductible. There is a tendency in case law there, confirmed by the Court of Cassation, that this theory of remuneration is accepted, of course, when effective performance is delivered by these managing directors. That is where our message 'documentation, documentation, documentation' comes in!

At the beginning when the building is there keep track of everything?

From the very beginning, when the building is purchased for the purpose of remunerating the manager. This must be recorded in the minutes and every year we must also record the full remuneration package of that manager/director in such a way that it is clear that this is his remuneration package which we are discussing.

Everything must therefore be properly accounted for?

Indeed!