The Flemish tax service's position on long lease structures has already given rise to major controversy in the past. In its position statement no. 15,114 of 10 August 2015, the Flemish tax service stated that the acquisition of the long lease right and the bare ownership by the same third-party buyer is always subject to registration duties of 10%. This position went against the position of the federal tax authorities and the Ruling Commission, which was more advantageous for the taxpayer. The Flemish tax service has now adjusted its initial position, as a result of which, from now on, real estate in Flanders which is subject to an existing long lease structure can also be purchased in a tax-friendly manner.
Background
In the past, professional real estate was often acquired through a split sale (see Eubelius Spotlights March 2015). This is an acquisition structure where the seller first establishes a long lease right and then sells the ownership of the property which is subject to that long lease right (bare ownership) to another party, often related to the leaseholder. Since a large portion of the full value of the property was subject to registration duties of 0.2% (later 2%) instead of the registration duties of 12.5% (Brussels or Wallonia) or 10% (Flanders), split-sale structures considerably reduced the registration duties payable by the purchaser(s).
While tax authorities have accepted such structures in the past, the split sale between related parties has been considered "tax abuse" since 2012, following the introduction of the general anti-abuse provision. As a result, such structures are generally no longer set up.
Acquisition of real estate held under a split-sale structure
Of course, this does not alter the fact that a large number of immovable properties are still being held under a split-sale structure. If a buyer wishes to acquire the full ownership of such real estate, he will have to purchase the long lease right on the one hand and the bare ownership on the other.
The federal tax authorities have always held the position that, in such a case, registration duties of 2% are due on the price of the long lease right, while registration duties of 10% or 12.5% are only due on the price of the bare ownership. This point of view, which is also followed by the federal Ruling Commission, means that even a buyer who wishes to acquire the full ownership of real estate held under a split-sale structure can achieve a considerable tax saving.
The Flemish tax service comes round
However, initially the Flemish tax service did not agree. In a position statement (no. 15,114) dated 13 August 2015, the Flemish tax service held that, in such a case, registration duties of 10% were always due on the full value of the property. This position, for which there was no clear legal basis, was often criticised in practice and led to legal uncertainty.
In a new position statement issued on 13 May 2019, the Flemish tax service has now changed its position. From now on, the Flemish tax service will also accept the federal approach. As a result, real estate situated in Flanders held under a split-sale structure can now also be acquired by a third party in a tax-friendly manner, which removes some major uncertainty in practice.
Wouter Claes
Korneel Decroix
Bruno Vanden Berghe
