Registration or VAT? Selected for you!

In principle, you must pay registration tax on the purchase of a land. But if you buy a land with a new construction, VAT may be due on the land portion. The purchase of building land is taxed in any case. But the amount of the tax bill depends on the situation. Sometimes registration duties - 10 percent - are due, in other cases VAT.

1. You only buy a building plot

The general rule is that on the purchase of real estate registration tax or sales tax is payable. The standard rate in the Flemish Region is 10 percent. Those who buy a building plot also pay that rate.

There is a reduced rate of 6 percent for the purchase of the only family home. But you cannot benefit from this when you buy a building plot, even if you start building your only owner-occupied home after the purchase. The reduced rate is only available for the purchase of a home: a property that immediately - or after normal maintenance or repair work - is used to house a family or a person. Building plots are explicitly excluded from the reduced rate.

If a building plot is sold at the same time as a new building, the land will follow the building's tax regime.

2. You buy land with a new construction

'If a building plot is sold at the same time as a new building - whether or not it is under construction - the land has followed the building's tax regime since 2011. If the building is sold with VAT, then VAT will also have to be paid on the associated land instead of registration tax, 'says Tim Van Sant, VAT specialist at PwC Tax Consultants.

A 'new construction' does not necessarily mean that the house or apartment has never been inhabited before. For the tax authorities, a building remains 'new' until December 31 of the second year following the year of the first occupation or first occupation of the building. Suppose a couple has a new house built, which will be taken into use in July 2020, but then quickly separate and sell the house and the associated land in January 2021. Then VAT may apply.

'A property developer is obliged to sell with VAT,' says Van Sant. 'Others can opt for the VAT regime. For example, a private person or a butcher who builds apartments to sell can opt for the VAT regime. He is then an accidental founder and has to comply with VAT obligations for that. ' Those who opt for the VAT regime must charge 21 percent VAT on the sale. 'The total sales price will therefore be higher, but the advantage for the seller is that he can pay the VAT that he himself paid when the building was built (for example on invoices from contractors and architect, for the construction of utility lines ... recover.

This may be deducted from the VAT to be paid on the sale. ' Suppose a building is sold for USD 500,000, the seller must charge 21 percent VAT or USD 105,000. If the founding works cost 300,000 usd, then the VAT on it of 63,000 usd can be recovered. The seller therefore only has to pay 42,000 usd VAT to the tax authorities.

The normal VAT rate for new construction is 21 percent. If a new building and land are sold together, 21 percent VAT on the land is more expensive than the 10 percent registration tax. 'That is why in practice we often work with different companies. One company sells the land and another company sells the new building. Because of this split, only 10 percent registration tax has to be paid on the ground, 'says Van Sant. The tax authorities accept this method on the condition that it is applied consistently to all construction projects, regardless of the capacity of the buyer. For a private buyer, registration fees on a land are more advantageous, but a buyer liable for VAT will prefer the VAT regime because he can recover the VAT paid under certain conditions. '

In 2021 and 2022, a 6 percent VAT rate for demolition and reconstruction will apply across the country. Can the land then be taxed at 6 percent VAT? 'In principle, this is possible if the land and the new building are sold together by the same company and of course also meet the conditions for the reduced VAT rate. But if a company used to work with two companies in the past and now deviates from that method, the tax authorities will look at this with suspicion, 'says Van Sant.

3. You buy a building yet to be built

Are you signing a purchase agreement with a project developer for a house or apartment yet to be built? 'The land will not be sold at the same time as the building, because it still has to be built. In that case, registration tax and no VAT must be paid on the ground, 'says Van Sant.

De Rouck P. (26/12/2020). Registration tax or VAT on the purchase of a building plot, De Tijd. Retrieved from

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