A VAT rate of 6% for demolition & reconstruction is (re)introduced

On 20 March 2024, the Minister of Finance published a press release stating that the new VAT system for demolition and reconstruction will again be extended to rental housing. The VAT rate of 6% was rolled out on 1 January 2024 to the private builder who demolishes and reconstructs their home. But this measure is thus (again) extended to homes that are rented out for at least 15 years.

Since 1 January 2024, a general rule has been in force for demolition and reconstruction projects throughout the country. Since then, the reduced VAT rate of 6% has only been applied to private building owners that demolish an old building and have their own single and private house built on the same cadastral plot with a maximum habitable area of 200 m². Private building owners and/or legal entities that demolish houses and have them rebuilt for subsequent long-term rental as part of social housing policy can also benefit from the reduced VAT rate of 6%.

As a result of this new general rule, construction promoters and investors can no longer use the 6% VAT rate for new demolition & reconstruction projects but will (suddenly) be confronted with the standard VAT rate of 21% (under certain conditions, there will be a transitional measure for 2024 for already existing projects). Still, it’s a very heavy chunk to digest.

On 20 March 2024, the Minister of Finance published a press release to reintroduce the former scheme, but only for rental housing. Investors who themselves are responsible for the demolition and reconstruction of a property can, therefore, once again benefit from the reduced VAT rate of 6%, but the following three conditions must be met:

• the rental property has a maximum habitable area of 200 m²;
• the rental property is used as the main residence;
• the rental properties are rented for at least 15 years to one or more successive private tenants.

Therefore, the property may not be sold or used for any other purpose.
Construction promoters are, therefore, still out of the loop and will still have to charge 21% VAT on sales. Meanwhile, they have been to the Constitutional Court about this. So, it is definitely to be continued.

Our PKF BOFIDI experts will be pleased to give you further advice

Do you have questions about the 6% VAT rate for demolition and reconstruction? If so, do not hesitate to contact Gladys Cristiaensen, VAT expert at PKF BOFIDI. She’ll be happy to help you.

This article was written by Gladys Cristiaensen.