VAT on demolition and reconstruction reduced from 21% to 6%

Extension of an existing measure

Are you buying a home that you plan to completely demolish and then rebuild? If so, you can benefit from a reduced VAT rate of 6% instead of the standard 21%. This was already possible in 32 major cities, but since January 1, 2021, you can take advantage of this measure anywhere. The conditions for cities that are not among the 32 central cities are somewhat more stringent. For properties located in one of the 32 central cities, the conditions are less strict and the old rules continue to apply.

Also new: the preferential rate applies not only to the initiators of the demolition and reconstruction. Owners who join a project later on (such as in co-housing projects or owners purchasing through a developer) also benefit. The new regime is a temporary measure in effect from January 1, 2021, through December 31, 2022.

Terms and Conditions

• Not everyone is automatically eligible for the reduced VAT rate. There are a number of conditions attached:

• The project must involve the demolition of a building—whether or not it is a residence—and the reconstruction of a residence.

• The demolition and reconstruction must be carried out by the same person. This could be a private individual or a property developer. The demolition must be extensive and cover the entire building.

• The rebuilt home must be located on the same cadastral parcel as the demolished building.

• This must be your primary residence. You must meet this requirement for at least five years; otherwise, you will have to repay part of the benefit you received.

• You must establish your residence in the rebuilt home without delay.

• The total living area of the rebuilt home may not exceed 200 square meters (even if it is an apartment).

Can people who want to sell their own and only home today and decide to buy another home also take advantage of the VAT reduction?

For the purposes of the definition of “sole residence,” the following are not taken into account:

• other properties of which he is a co-owner, bare owner, or usufructuary by virtue of inheritance;

• another residence that he occupies as his primary residence, where he has established his domicile, and which was sold no later than December 31 of the year following the year in which the new residence was first occupied or taken into possession.

For example: You move into your new home (after the original building on that lot has been demolished) in May 2021. You must then sell your previous home by December 31, 2022, at the latest

Married or legally cohabiting partners are considered as a single unit when determining whether this is their sole residence. Therefore, if one of you already owns a home in this situation, both of you are subject to the 21% VAT rate (unless one of the exceptions described above applies).

To which works does the reduced rate not apply?

The reduced VAT rate applies only to work related to the actual residence. For example, the installation of a sunroom, a garden shed, the landscaping of a garden, the construction of a swimming pool, or the installation of a fence are always subject to the standard rate of 21%.

Know your budget

Knowing how much tax you’ll have to pay on the purchase of your home is crucial. After all, taxes are the largest expense associated with your purchase. To get a clear picture of your costs, you also need to know the tax rates. Do you have to pay registration fees or VAT? Are you eligible for a preferential tax rate? Your notary can review your file and determine whether you meet the requirements. They can also inform you about the taxes associated with your purchase and their impact on your overall budget.