Real estate rental and its alternatives

Renting out to us is still free of VAT, which makes Belgium an outsider in Europe. But there are ways in which the entrepreneur can still recover the VAT on a building you have constructed. And there is also a new law in the making that will facilitate that. Katrien Huysse, VAT specialist at VGD, is closely following the new developments.

Katrien Huysse

Real estate rental and its alternatives

VAT is a heavy cost for the entrepreneur. If you construct a building of about 1 million euros, you still have to pay 210,000 euros in VAT on top of that. You can't just recover it, although there are ways to do it. For example, the real estate financing rent. How exactly does that work?

The real estate financing rent actually works as follows. Imagine I have a business and I need a building. I come to you and say, "I need that building. Can you build that for me or can you buy it for me? I will rent this from you and use it for my economic activity.

Does that have disadvantages?

It has disadvantages, including the fact that I have to be proactive. In the sense that I have to tell you which building I need and that you have to build it or buy it. And a second, quite big disadvantage, is that during the first 15 years that I rent from you, I have to pay back your investment costs. This simply means that I paid for the building in full after 15 years. So if I still want to buy it afterwards, I've actually paid it once before and I'm going to pay too much.

That is annoying, of course. One measure to help young start-ups are business centres. If you raise one, you can recover VAT anyway, but there are conditions attached to that?

A business centre should actually be seen as a large building with several taxpayers. Each taxpayer has its own private areas there. These are usually offices or desks and on the other hand there are also common areas: meeting rooms, sanitary facilities and the like. In addition, as manager of the business centre, I am also going to have to provide services. I am going to provide a reception desk, fax, telephone and so on. And that's why the administration says that you do more than just passively make a property available. You are going to actively participate and you are going to provide services. And that is then subject to VAT.

There is also the VAT unit, what is that exactly?

You should actually see the VAT unit as a kind of balloon that you are going to put around the taxpayer. So, in the context of real estate, we often see that the property is in a real estate company and that this real estate company is going to rent it out to the operating company. This is, in principle, free of VAT, not recovered. Now we are going to put the balloon around it, so that the administration no longer sees these two taxpayers, but only the balloon. Thus, the unit is considered to be a single taxable person.

And can anyone just get into that balloon?

Anyone is allowed to enter that balloon, as long as the commitment requirements are met. You actually have to be connected on three levels. A financial connection, both economic and organisational.

Real estate is the basis of almost every business activity. It has taken a long time, but in the end the government has understood that this is important for entrepreneurs, and a law is being drafted which will enter into force in October this year. What do you already know about this law?

They have been working on it for years and it was first in the Summer Accord. However, it was subsequently cancelled for budgetary reasons. This law will optionally subject professional rental, i.e. rental between taxable persons, to VAT. This means that if both the landlord and the tenant agree, the letting will be subject to VAT. This of course has the advantage for the owner that he can recover the VAT on his investment.

So it's actually in a B2B environment?


It is an expensive measure, you just said. Do you know how much?

At that time, it was estimated at EUR 420 million.

That is not a small amount. The entrepreneurs will be happy, of course, because the procedure will be made easier.

Yes, it is simpler. They no longer have to seek out these loopholes in order to recover VAT. On the other hand, investments in new real estate will be stimulated by this measure and our handicap compared to other countries will also be eliminated, which will, in principle, strengthen our competitive position.


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