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General increase in registration duties on the acquisition of Flemish real estate announced

Real Estate Alert | Business Tax

The Flemish government announced in its September Declaration on 27 September 2021 a reform of the registration duties payable on the acquisition of ownership or usufruct of real property located in the Flemish region. The preliminary draft decree accompanying the 2022 budget issued on the same date provides an overview of the proposed amendments, which will affect real estate developers and investors active in the Flemish market.

This alert highlights some of the most important proposed changes but it should be noted that the draft decree has not yet been adopted and further modifications still may be introduced. If accepted, the changes generally would apply as from 1 January 2022.

Change in rate of registration duties

Although the Flemish legislator seems to present the reform as a decrease in registration duties, the proposals would result in a general increase in the registration duties payable on the acquisition of ownership or usufruct of real property located in the Flemish region. Under article Vlaamse Codex Fiscaliteit (VCF), the standard rate of 10% for the purchase of real estate in Flanders would increase to 12%.

A decrease in the rate is foreseen only in relation to the (joint) acquisition by one or more private individuals of the full ownership of a sole and personal private dwelling (article VCF). In this case, the rate would be reduced from 6% to 3%. The rate would be further reduced to 1% (currently 5%) where there is a commitment to perform major energy renovation works or to (partially) demolish and rebuild the sole and personal private dwelling (article VCF).

The regime allowing the portability of registration duties (meeneembaarheid/portabilité) paid on the previous acquisition of a private dwelling (subject to a maximum of EUR 13,000) could not be used in conjunction with the new reduced rates and the regime would be progressively abolished by 1 January 2024.

Based on the current draft of the decree, the reduced rate of 3% would not apply in relation to the split sale of land parcels by a real estate developer, i.e., where the new constructions on the plots are sold separately to private individuals and VAT is applied. In this case, the new standard rate of 12% would in principle apply on the acquisition of the land parcel.

The 10% rate would continue to apply to the acquisition of undeveloped estate and undeveloped immovable property for which a “type 2 or 3” nature management plan exists, as defined in the decree issued on 21 October 1997 regarding nature conservation and the natural environment. 

Regime for professional sellers unchanged

This specific regime was introduced after the reduction of the standard rate in Flanders in 2009 and provides for a reduced rate of 4% for the acquisition of real property (both developed and undeveloped land) by certain professional real estate investors if several conditions are met. 

The preliminary draft decree does not propose any changes to the regime nor to the 4% rate applicable on purchases by professional sellers.

Entry into force

The new standard rate would enter into force on 1 January 2022 after the publication of the decree in the Belgian official gazette.

However, in accordance with the standard principle laid down in article VCF, the date of the private agreement between the parties is decisive when determining the applicable rate. Therefore, where the (private) agreement is signed before 1 January 2022 (even when it is signed under certain conditions precedent which would be fulfilled only after 1 January 2022) but the deed is notarized after that date, the 10% rate would in principle apply upon registration of the notarized deed in 2022.

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