Extension of the reduced VAT rate on demolition and reconstruction in Belgium until end of June 2025

Background

Generally, the construction of a new dwelling is subject to a VAT rate of 21%. However, those who demolish an old dwelling and build a new one on the same plot can, under certain conditions, benefit from a reduced rate of 6%. Until recently, two schemes were available:

1. Urban scheme: a permanent scheme in place since 2007 in 32 cities, without social conditions; it was sufficient that demolition and reconstruction took place within the designated urban areas. This measure applied only to real estate work (and not to the sale of rebuilt dwellings).
2. Temporary scheme: a nationwide measure introduced during the COVID-19 pandemic, allowing the reduced VAT rate of 6% outside cities as well, provided certain social conditions were met. This scheme ended on December 31, 2023, and applied both to real estate work (demolition and reconstruction) and to the sale of rebuilt homes.

New permanent scheme

As of January 1, 2024, a new permanent scheme applies throughout Belgium. The VAT reduction now exclusively applies to the demolition and reconstruction work itself (real estate work) and requires compliance with known social conditions such as:

• The dwelling must be the builder's sole and primary residence.
• A maximum livable area of 200 m2.

Additionally, the reduced rate also applies to social rental arrangements, for instance through a social rental agency. As of June 1, 2024, the scheme was extended to homes intended for rental for at least 15 years to individuals who immediately establish their residence there.

Transition scheme for the 32 cities measure and the sale of rebuilt homes to end in late 2024

Two measures ended on January 1, 2024, namely the 32 cities measure and the reduced rate applicable to the sale of rebuilt homes. However, until the end of 2024, a transitional measure allows continued use of these schemes. A few conditions apply: the planning permit must have been applied for before July 1, 2023 (sale of rebuilt homes) or January 1, 2024 (32 cities measure).

Legislative proposal

Due to delays caused by exceptional weather conditions, among other factors, it was decided to extend the transitional scheme by six months, until the end of June 2025. This extension gives builders and developers additional time to complete their projects while maintaining the reduced VAT rate of 6%. The legislative proposal, unanimously approved by the Finance Committee of the Chamber, now awaits approval by the plenary session.

For builders, contractors, and developers, this extension provides a welcome relief from fiscal pressure and extra breathing room to complete ongoing projects without additional costs.