The purchase tax on buying a property is a registration tax, that is a tax due when the notary’s deed is registered with the Ministry of Finance. Traditionally, the purchase tax was 12.5%, but a few years ago Flanders reduced the standard rate to 10% with a reduced rate of 6% for first time buyers.
Since 1 January, the standard rate has gone back up to 12%, but there is a 3% rate for first time buyers or even 1% if they undertake to carry out a major energy refurbishment.
To qualify for the 3% rate, the buyers must not already own a home or building land and they must take up residence in the house or flat within three years and register with the commune.
- Homeowners who want to buy a new property and who do not want to sell their current home cannot benefit from the 3% rate. At the time of purchase, they must not already be the full owner of another house (or building land) or they will have to pay 12% registration tax.
- Buying a property through or with a company is not allowed at 3%.
- The 3% rate is also not for individual buyers who buy either the usufruit or the bare ownership of a property. This excludes split purchases of properties, that is a common estate planning technique when parents who downsize from a big house to a comfortable apartment with a lift. They sell the house, gift part of the sales price to the children (the gift tax on cash is only 3%), the children buy the bare ownership of the flat and the parents the usufruit.
However, the legislator has given homeowners some leeway. Buyers who already own a property – in Belgium or abroad – can still pay the 3% purchase tax if they undertake to sell it within two years. There is a particular condition: the law requires that they sell it because they buy the property in Flanders. The taxman can ask you to prove that there is a causal link between selling and buying.
The reasoning is clear: the buyers sell their home to buy another one. Giving it away is not an option.
The law is badly written, it requires that at the time they sign the purchase deed “the purchaser is not the full owner of another home or building land. If there are several purchasers, they are not together full owners of another residential property or building land on the date specified.”
If you own property, what can you do to benefit from the reduced purchase tax rate?
You can gift or sell your other property before you go to the notary. You do not have to sell it in order to buy the new property
By way of alternatives, it has been suggested that you may gift the property to a parent with the understanding that they cannot sell it and that if they die before you, the property reverts to you (probably without inheritance tax). As the law says that you are not, i.e. must not be the full owner of a property, you are not excluded from the reduced purchase tax if you only own the bare ownership of the flat.
Other suggestions are that you gift either a share of the first property or the bare ownership or usufruit, to children or to a company, so that one is no longer the full owner of that property,
However, there is a general anti-abuse rule in the tax code. If one sells or gifts in order to benefit from the 3% rate and if this is contrary to the objectives of the legislator, the Flemish Tax Authorities (in short “Vlabel” for Vlaamse Belastingdienst”) can ignore the sale or gift and charge the 12% registration tax on the second new purchase. It is possible to prevent this by giving evidence that one had other reasons, other than tax reasons, for the sale or gift, but that may prove to be difficult.
There have already been cases where VLABEL (the Flemish tax authorities) has questioned the application of the reduced registration tax relying on the anti-tax abuse rule and it is to be expected that purchases at 3% will be closely monitored.
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