When it comes to VAT
Real estate - VAT – RETT (new rate of 4%)
When selling new immovable property (including a building site), VAT is due on the supply. In order to prevent VAT and RETT being due on the transaction, a RETT exemption applies so the acquirer of the real estate does not have to pay any RETT (the concurrence exemption). If the new immovable property is owned by a BV and the shares in this BV are transferred, no VAT is due on this transaction either (if all conditions are met).
In 2023 it became clear that the Ministry of Finance no longer supports the application of the RETT concurrence exemption for these types of real estate share transactions. It is believed that in such a situation, VAT should be due on the sale of new immovable property. However, levying of VAT on a supply of shares is impossible. As a result, the non-payment of VAT in such a situation should be corrected via the RETT (4% rate). The RETT Act (Wbr) must therefore be amended, more specifically the abolition of the concurrence exemption. This change does not mean that all real estate share transactions are subject to 4% transfer tax.
The intention is for this change to come into effect on January 1, 2025. Please note, one cannot wait until 2025. Action is required, especially with regard to the transitional arrangement for existing projects.
After previous initial proposals, the formal proposal to adjust the concurrence exemption in the Wbr has now been included in the 2024 Tax Plan. Everyone can now read on the basis of which conditions the concurrence exemption for real estate share transactions will or will not apply as of 2025. Without further regulations for ongoing projects or projects that were recently completed (before September 19, 2023), this change would mean that parties could be surprised with a 4% RETT. Fortunately, a transitional arrangement has been made for these situations, so that RETT is not due provided the conditions of the transitional arrangement are met. One of those conditions is registering your project with the tax authorities before April 1, 2024.
If you would like to know more about this change in law, whether or not the concurrent exemption applies to your situation as of 2025, what the requirements are for applying the transitional arrangement or other questions about the bill, please do not hesitate to contact us.
If you have any questions about this topic or if you would like to discuss the topic further, please do not hesitate to contact us at info@vatpartners.com
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