On 9 October 2023 the federal government reached an agreement on the 2024 Budget. The budget agreement contains a number of measures which will have a direct impact on the real estate sector. These measures are summarized below.
Note that this summary has been drafted on the basis of preliminary information obtained in relation to the Budget agreement. Changes to the proposed measures may therefore still be possible.
The below measures are expected to enter into force as of 1 January 2024 (although this is not explicitly stated in relation to all measures listed below).
Currently the standard registration duties in relation to the granting or transfer of long lease rights (“erfpacht” / “emphytéose”) and building rights (“recht van opstal” / “droit de superficie”) amount to 2% on the aggregate value of the (periodical) remuneration (s) and charges.
Under the budget agreement measures, it has been foreseen that such rate would increase to 5%.
This will obviously impact the attractivity of so called ‘re – unification’ sales of formerly split acquisition structures (‘bare property’ vs ‘long leasehold’ structures). It will also significantly increase the registration duty cost for long leaseholds granted to commercial care home operators (organized through a commercial company) where historically long leaseholds were often used.
No changes are anticipated with regard to the registration duties applicable to ‘normal’ rental agreements (i.e; 0.2% as a rule).
A minimum 5 year stand-still would be introduced in relation to B-REIF’s (“Gespecialiseerde vastgoedbeleggingsfondsen” “GVBF” / “Fonds d'investissement immobiliers spécialisés” “FIIS”) implying that entities which enter into the B-REIF regime, will be required to retain this regime for a minimum period of 5 years.
Upon entry into the B-REIF regime of an existing real estate company, exit tax is levied at 15% on latent capital gains and tax free reserves. In the event the abovementioned 5 year stand-still condition would not be respected, an additional 10% corporate income tax would be levied (and thus increase the initial exit tax rate of 15% to 25%).
A same 5 year stand still would apply in respect of the ownership of shares obtained in a B-REIF in return for a contribution of an asset (or assets) into a B-REIF.
The full scope of this last rule remains somewhat uncertain. It is currently not clear whether this rule would only apply in relation to contributions in kind in return for shares, or whether contributions in kind without the issuance of shares and/or (de)mergers would also be captured.
Furthermore, it is not clear whether this rule would be expanded to also cover contributions (in kind) to (institutional) BE-REIT’s (“Gereglementeerde vastgoedvennootschappen”, “GVV” / “Sociétés immobilières réglementées”, “SIR”).
Finally, it remains unclear whether this stand still condition would only apply to B-REIF’s established / contributions in kind into B-REIF’s performed as from 1 January 2024 or also for previous B-REIF conversions or contributions if it would appear – as from 1 January 2024 – that such 5 year stand still period would not be respected.
This rule risks to be rather detrimental for the B-REIF / REIT community. It would significantly reduce the ‘liquidity’ of REIFs (as a future buyer within the 5 years window will be restricted to de – convert the B-REIF, which e.g. could be required in view of its own structure and / or envisaged development activities). Also the restriction with regard to the shares issued as a result of a contribution in a B – REIF creates an issue, as it would e.g. make it more difficult to place a new B – REIF with investors. If the rule would be extended to B – REITs, this would restrict the much used technique whereby assets are acquired against issuance of shares (subsequently placed on the stock market).
Investment vehicles such as B-REITs and B-REIFs, are subject to an annual subscription tax in Belgium imposed at a rate of respectively 0.0925% and 0.01% on net assets placed in Belgium.
Further to a tax reform announced end 2022 the subscription tax would be non-deductible for 80% (applicable for the subscription tax due as from 1 January 2023). Please read our Tax Alert of 14 October 2022 in this respect.
Under the budget agreement measures the non-deductibility of the subscription tax would increase to 100%.
Note that corporate income taxes paid on the non-deductible subscription tax are themselves also part of the taxable base of a B-REIT or B-REIF, leading to further corporate income taxes becoming due (the so-called ‘tax-on-tax’ snowball effect).
One of the most prominent measures is the change to the existing demolition and reconstruction schemes. The temporary measure, which made it possible to sell homes at 6% VAT, will be adjusted significantly. The permanent system of reduced rates in urban areas is also undergoing a significant change.
For further details, please read our VAT Alert on this topic.
Astrid is a Partner in the Tax advisory team. She has more than 12 years of experience working in the field of corporate international tax, M&A and Real Estate Tax. She has extensive experience in advising Belgian and multinational clients on tax matters in the context of M&A and Real Estate transactions. Astrid combines her tax and legal background with relevant real estate industry experience.