BELGIUM Law and Practice Contributed by: Pieter Puelinckx, Yves Moreau, Melissa Verplancke and Gauthier Callens, Linklaters
socio-economic activities (eg, retail activities), the energy performance certificates and asbes - tos inventories.
exercise of this option must be reflected in the sales agreement and in the notarial deed that records the sale. Under certain conditions, a reduced rate of 6%
8. Tax 8.1 VAT and Sales Tax
may apply to residential properties. 8.2 Mitigation of Tax Liability
VAT (at a standard rate of 21%) may be appli - cable to sales of real estate assets classified as “new” for VAT purposes (ie, until 31 December of the second year after its initial use or occupa - tion). This classification applies to newly con - structed buildings as well as those that have been substantially renovated. With respect to renovations, the VAT regime is largely deter - mined by administrative practices. Tax authorities have clarified in their commen - tary of the VAT Code that significant renovations that fundamentally alter the key components of a building, namely its nature, structure or intended use will qualify it as “new” for VAT purposes. A property can also be qualified as “new” if reno - vation costs, excluding VAT, amount to at least 60% of the building’s market value, excluding land, upon completion of the works. The imposition of VAT on the sale or acquisi - tion of property is influenced by the nature of the seller. For new properties sold by: • Professional developers – they are legally bound to sell such properties with VAT included. However, in cases of renovations meeting the “60%” threshold, developers might choose not to consider the real estate asset as new (with application of registration duties instead of VAT). • Non-professional developers – they have the option to apply VAT, requiring amongst others a prior declaration to VAT authorities. The
When transferring shares of a company that owns real estate, such transactions do not, in principle, incur transfer taxes or any other real estate-related taxes (except in case of dispute by the tax administration over tax abuse, see 2.10 Taxes Applicable to a Transaction ). How - ever, a legal entity shareholder may be subject to capital gains tax if its participation in the com - pany (that owns real estate) does not meet the criteria to be eligible for the “dividend received deduction” (DRD). To be eligible for the DRD, the participation must notably: • relate to a company subject to corporate income tax; • relate to shares representing at least 10% of the shares outstanding or having an acquisi - tion value of at least EUR2.5 million; and • be held during a continuous period of at least one year. The purchaser of a SPV’s shares indirectly bears future capital gains tax on the SPV’s real asset(s) in case of sale of such assets post-closing. To mitigate this, the seller and the buyer of the SPV’s shares usually share the “tax latency” (the corporate income tax that would be due in an asset sale) by adjusting the SPV’s share price with a negotiated discount. In asset deals, some investors opt for long-term leases or right to build over full ownership trans - fers, due to lower registration duties (see 2.10 Taxes Applicable to a Transaction ).
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