to-business) context, and not with an
individual (outside of a professional
context) or other non-VAT taxpayers.
The explanatory memorandum of
the regulation clarifies the possibility of
using the optional VAT system on a part
of a building. This is only possible if
this part can be operated "economically
independent," for example, a commercial
space on the ground floor of an apartment
building.
Since the new system is optional, both
parties to the rental agreement need to
accept the application of VAT together
and explicitly. The rental agreement
will therefore need to provide a clause
confirming the intention of both parties to
bring the rent under VAT.
The application of VAT will be final
and irrevocable for the full length of
the rental agreement. If, later on, a new
rental agreement is agreed upon, or if an
ongoing agreement is extended (after the
original duration of the rent), parties need
to decide whether to apply VAT again.
This means a clause confirming the choice
for VAT will need to be added or at least
referred to in case of a new agreement or
an extension.
the owner will be able to deduct the VAT
spent on the construction of the building,
of the budgetary consequences thereof,
the new system will only be possible
for "new" buildings. Only buildings for
which the VAT for the construction of
the building was first payable on or after
October 1, 2018 (i.e., the first invoice was
sent) can be subject to the new optional
VAT regime.
Also, renting out a building after a
thorough renovation, based on which
the building can be considered as
"new" under the VAT regulation, can be
subjected to the application of VAT.
Whether or not a building is "new"
is only relevant in order to know whether
or not the building is eligible for the
new system. Once it is established that a
building can be considered "new," every
rental agreement that fulfils the conditions
explained above can be subjected to VAT.
During a period of 15 years after
the VAT, paid for the construction of
a building, has been deducted, the
administration can make the decision
to revise the situation and demand the
payment of (a part of) the recovered VAT
in case the designation of the building has
changed and the new designation cannot
lead to the deduction of the paid VAT.
For example, if the first rental
agreement for the letting of offices was
subject to the optional VAT-regime, it
opens up the possibility to deduct the
paid VAT. However, in case a second
agreement is made five years later, without
administration will have the possibility to
demand payment of the part of VAT that
was unjustly recovered. The same applies
if the designation of the building went, for
example, from the letting of offices to the
letting of residential real estate.
Lastly, the newly adopted regulation
also installs the mandatory applicability
of VAT on any rental agreements for a
duration of six months or less. This is,
however, not the case if the real estate
is rented to individuals, who use it for
private purposes, if the real estate is used
for residential purposes, or if it is rented
to a nonprofit organization.
The fact that an optional VAT regime
for rental activities has been accepted
will soften the competitive disadvantage
of owners of Belgian real estate. Although
this is a big step in the right direction,
since the new system is restricted to the
B2B context and only applicable towards
newly constructed or renovated real
estate, it will take some time before the
effect will be noticeable on the Belgian
real estate market.