Do I have to pay VAT or registration fees for a projects?

When do we refer toprojects?

Before we get to the heart of the matter, it is important to first clarify the definition of aprojects” home. A home or apartment is projects through December 31 of the second year following the year the property was first occupied. In other words, suppose you buy a newly built home in June 2023; your home will retain theprojects designation through December 31, 2025.

The salesperson's role is important

First things first, the seller’s identity matters:

• If the seller is a real estate developer, the sale must always be subject to the VAT system.

• If the seller is not a real estate developer but rather a regular VAT-registered business or a private individual, they may choose whether to conduct the sale subject to VAT or registration tax. It is important that this is clearly communicated from the outset and that the necessary formalities regarding VAT administration are completed immediately.

All percentages at a glance

“VAT is always 21% and registration fees are always 12%, right?” Think again! When purchasing projects , the sale projects be subject to VAT, registration fees, or a combination of both. The most common scenario is a combination of VAT and registration fees. Ready to dive into these three options? Let’s go! 

Option 1: 21% VAT or 6% VAT

21% VAT

21% VAT is the standard VAT rate for projects. This rate almost always applies to projects. This is therefore the most common scenario.

6% VAT

6% is a preferential rate that allows projects to projects purchased at a reduced VAT rate of 6%.

When purchasing a property to be completely demolished and rebuilt, a reduced VAT rate of 6% now applies throughout Belgium instead of 21%. This measure was already in effect in 32 major cities and has been temporarily extended to the entire country since 2021. Please note that this is a temporary measure currently in effect until December 31, 2023, unless extended. The conditions for the 6% VAT rate are also more specific for homes outside the 32 central cities.

However, there are two sets of conditions that both the project and the buyer must meet. We’ll briefly summarize them for you:

• Condition 1 - Project: The project must involve the demolition and reconstruction of the dwelling. A project involving construction on a previously undeveloped lot will never qualify for the 6% VAT rate.

• Condition 2 - Buyer:

  • You must have met the previous two requirements for at least 5 years.

  • The total living area of the house or apartment being purchased may not exceed 200 square meters

  • You must take up residence in the rebuilt home immediately. It must be the only home used as your primary residence. You will have until December 31 of the year following the first occupancy to sell your current family home.

The fact that a project qualifies for a reduced rate does not automatically mean that all buyers of that project also qualify. Similarly, meeting the eligibility requirements as a buyer does not mean you can purchase any new construction project at a 6% VAT rate. Not sure if you meet the eligibility requirements for 6% VAT? Ask our real estate advisors for advice. 

Option 2: registration fees of 12% or 3% (Flanders)

When purchasing real estate, including a plot of land, registration fees must be paid. These are taxes that the notary is required to collect and then remit to the government.

12% registration fee

For projects Flanders, a standard rate of 12% applies to registration fees, just as it does for existing homes. This rate applies unless one of the preferential regimes is met.

3% registration fee

In Flanders, you pay a 3% registration fee if the property is your first and only family home and you establish your residence at that address within three years of purchase. 

Option 3: Combination of VAT and registration fees (Flanders)

In projects often two sellers involved: one for the land and one for the buildings (naturally, with one preliminary agreement and one deed of sale). In this case, the buildings are sold under the VAT system, at a rate of 6% or 21%, depending on the applicable conditions. The land, however, is always sold subject to the standard 12% stamp duty rate.

This can actually be advantageous for the buyer, even if 21% VAT is due. Since part of the purchase is subject to the 12% registration tax rate, the financial burden is slightly reduced.

What about portability, then?

Thanks to the transferability system, under certain conditions, you can receive a refund for part of the registration fees you paid on a previous purchase or apply them toward a new purchase.

Transferability applies only if registration fees are involved, meaning either when the transaction is subject entirely to registration fees or to a combination of VAT and registration fees. In the latter case, this naturally applies only to the portion subject to registration fees and not to the portion subject to VAT.

Important: The "portability" provision will be abolished as of January 1, 2024. We look forward to sharing our top tips on portability in a future article.

Don’t let the complexity of the regulations deter you. Our real estate experts are always ready to guide you through all your real estate plans. Are you looking for a new-build home? Take a look at our various projects here.