On 24 March 2018, the Belgian federal government issued a press release following the interim audit of the 2018 budget, announcing optional VAT on (qualifying) real estate leases as of 1 October 2018.
No official text is available yet.
A measure to this effect was already announced last year in the framework of the Summer Agreement which reformed the Belgian tax system. In October, the measure was scratched due to its budgetary consequences.
New option to apply VAT to B2B real estate leases and VAT measure for warehouses
It is now expected that, as of 1 October 2018, VAT can be applied to lease payments for a new or renovated building (i.e. one considered new for VAT purposes). In the B2B context, the advantage is twofold: (i) input VAT on construction and renovation costs can be deducted by the owner (lessor) and (ii) input VAT on lease payments can be deducted in whole or in part by the lessee, depending on whether the lessee is entitled to a full deduction of input VAT.
The new rules should have a positive effect on rental prices as the (non-deductible) VAT borne by the lessor need no longer be compensated through lease payments, which should encourage more businesses to invest in Belgium.
In addition, the scope of application of VAT to leased warehouse space will be extended. In this regard, recent disappointment with respect to the establishment of e-commerce warehouses outside Belgium could have played a role.
The specific conditions, scope and date of entry into force of the measure have yet to be disclosed, but more information will most likely be released shortly.
