Belgium – Option for VAT on (professional lease) : turning back the clock

I reported earlier that as part of agreeing to the new government budget for 2017-2018, the Belgian Federal Government announced at the end of July 2017 the option to make real estate leases between professionals subject to VAT as of 1 January 2018.  This would have been a revolution for the real estate sector in Blgium as until now real estate leases were not subject to VAT (except, if certain conditions were met, for leases for parking places, warehouse space and financial leasing). The Belgian Federal Government was inspired by the Dutch model that also provides for an optional system of VAT-application.

It would have allowed the landlord to opt for a VAT-application to the letting of its property if the tenant is a professional. By doing so, the landlord could have recovered the VAT paid on the construction costs or the VAT paid on the acquisition of a new property (i.e. “new” in accordance with VAT-rules). For the tenant the VAT-application would have been in most cases be neutral, as it would have been in a position to deduct such VAT payments.

However, last weekend the Prime Minister and its Vice Prime Ministers have decided to cancel the (optional) VAT on immovable letting for professional use (except for the logistic sector) due to the federal government budget and for financial reasons. The logistic sector can nevertheless still opt for VAT-application if certain conditions are met (which will be more detailed in a letter from the administration).

Apparently only Belgium and Greece are the only 2 European countries who have this approach with respect to VAT and leases.

We will keep you posted. 

Lieven Peeters, ALTIUS, Brussels ([email protected] – www.altius.com)