BELGIUM Law and Practice Contributed by: Pieter Puelinckx, Yves Moreau, Melissa Verplancke and Gauthier Callens, Linklaters
2.9 Condemnation, Expropriation or Compulsory Purchase Public entities have the right to expropriate for the public interest and against indemnifica - tion, subject to limitations which are notably enshrined in the constitution. Certain properties are encumbered with a legal pre-emption right enabling public authorities to fulfil their duties of public interest (regarding nature conservation, spatial planning, housing policy, water management, etc). Pre-emption and repurchase rights can also be contractu - ally stipulated, which often occurs in the sale of industrial real estate by public authorities. 2.10 Taxes Applicable to a Transaction In share deals as well as in other restructuring operations (such as (de)mergers) neither transfer tax nor VAT typically applies. Other taxes, such as capital gains tax on the share transfer (see 8.2 Mitigation of Tax Liability ), may potentially be levied. Additionally, Belgian law includes anti-abuse regulations that may make certain legal acts unenforceable against tax authorities. If the tax administration considers that a trans - action was specifically designed to transfer a real estate asset via a share deal (or a restruc - turing operation) instead of an asset deal and is abusive (for instance, on the basis that the transaction structure would be set up with the sole or essential objective to avoid a disadvanta - geous tax regime), it could claim the payment of the taxes that would have been due in an asset deal structure as well as applicable penalties. Regarding asset deals, the transfer tax could either be the applicable VAT rate or registration duties, depending on whether the transaction
falls under the VAT regime (see 8.1 VAT and Sales Tax ). When VAT is applied to a real estate sale, registration duties are correspondingly exempted. If a real estate transfer of ownership is not sub - ject to VAT, registration duties apply. Registration duties rates vary by region: • 12.5% in Brussels and Wallonia; and • 12% in Flanders. For long-term leases and rights-to-build, duties’ rate are usually 5%. 2.11 Legal Restrictions on Foreign Investors Investors must be mindful of the existing legal frameworks aimed at the prevention of money laundering and the financing of terrorism, as well as the consequences of international sanctions on their activities in Belgium. It is now common to encounter clauses in real estate agreements (including leases) which allow for contract ter - mination if international sanctions are imposed on a party, or clauses that prevent the transfer of contractual rights to a person subject to inter - national sanctions. Furthermore, as of 1 July 2023, a foreign direct investment screening mechanism entered into force in Belgium pursuant to which non-EU investor (including natural persons or entities with their principal residence or registered office outside the EU and EU-based entities with one of their ultimate beneficial owner having its prin - cipal residence outside the EU) must submit a notification to a screening commission for any direct or indirect acquisition by non-EU inves - tors of:
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