Temporary 6% VAT rate on demolition and reconstruction
Up to now the 6% VAT rate was only applicable when the house was NOT completely demolished. For 10 years an exception applies, but which is limited to a number of specific areas in Belgium (32 in total). In these areas, the demolition and reconstruction is subject to 6% VAT. The Belgian government now wants to extent this exception to the complete Belgian territory.
As a general rule, all transactions related to building and renovating are subject to 21% VAT. Some exceptions apply and the most important one is for renovations which fulfill the three following conditions:
The house is older than 10 years;
It is exclusively used for private habitations or ancillary for professional purposes;
The works (transformation, renovation, rehabilitation, improvement, repair and maintenance) are invoiced directly to the end user (owner of tenant).
Generally speaking, this VAT rate applies to both the materials and to their placement, but this should be done by the same contractor. You cannot ask for the 6% rate to be applied to the purchase of the materials in your local do-it-yourself store, not even when they will be placed by your contractor.
Demolition and reconstruction
The tax authorities - followed by case law - consider the demolition followed by reconstruction not as a renovation. The tax authorities therefore look at the volume of the renovation and the comparison between the value of the house and the renovation.
In order to fight dilapidation in certain urban areas, it was decided in 2007 to apply the 6% VAT rate in case of demolition, followed by reconstruction in certain areas. It concerns 32 cities and zones a.o. Antwerp, Sint-Niklaas, Charleroi, Ghent, Liège, ...
In the current plans of the government this scheme remains to exist.
Extension for private owners
In its policy statement, the government wants to introduce the 6% VAT rate for demolition and reconstruction, next to the existing schemes, when the following conditions are met:
The client is a private individual;
The reconstructed house should be destined for habitation by the client. This implies that the client should live in the house himself, and that it cannot be rented out;
The habitation obligation is applicable for a period of 5 years. If the client does not live in the house during this 5-year period, he should pay back the VAT saving pro rata temporis;
The constructed house is the only and own house of the client;
The total floor area of the reconstructed house does not exceed 200m2.
These conditions are stricter than the conditions for the reduced VAT rate in the 32 areas.
To the condition that you should live in the house yourself and cannot rent it out, one exception applies, namely when you after the reconstruction rent the house to a social housing agency. But this condition should be fulfilled during fifteen years. Additionally, the condition concerning the maximum floor area does no longer apply.
The reduced VAT rate would also be possible for the supply of a building (this is currently not the case in the 32 areas). Instead of living in the house himself the owner could also immediately sell the house. This can be done at the 6% VAT rate under condition that the buyer fulfills the conditions concerning habitation, only house, surface, .. With these exceptions also building promotors can demolish, reconstruct and subsequently sell at 6%.
This VAT reduction is only meant in order to support the construction sector during the first years after the corona crisis. That's why it is a temporary measure: the VAT should become due between 1 January 2021 and 31 December 2022, and ultimately on 31 December of the year of the first use of the house.
The fact that the demolition/reconstruction was already started before 2021 is no problem: the VAT which becomes due in 2021 can still benefit from the reduced VAT rate.