The Brussels government has implemented an important tax reform that aims at « keeping the middle class in Brussels or making them return » by implementing a more advantageous regional tax policy. Within the framework of this reform, several measures have been adopted, including the increase of the allowance of the registration duties from 60.000 euros to 175.000 euros that must compensate the suppression of the housing bonus as from January 1st 2017.
In practical terms, this tax allowance means a tax saving of 21.875 euros (12,5 % x 175.000 €) for the acquisition of a property, while before the registration duties were fully due. The large amount of these duties often was an obstacle for those who wanted to become owner, mainly the isolated individuals, young families as well as the single-parent families. By increasing the tax allowance this way, this measure leads to the reduction of the entry cost on the buyers market.
So this measure should be welcomed as it potentially allows a larger number of individuals to access the property market in Brussels. Furthermore, the homeowners in Brussels who occupy their property as primary place of residence will benefit from an annual premium of 120 euros.
Although this tax reform regarding the purchase of housing accommodation seems very beneficial at first sight, we must however clarify this affirmation:
1. The tax allowance is subject to strict conditions of application:
1) At the date of the purchase agreement, the purchaser may not be a freeholder owner of another property that is intended for housing in whole or in part (when the acquisition is done by several persons, each purchaser must meet this condition and, furthermore, the purchasers may not be joint freehold owners of other property that is intended for housing in whole or partially). The properties located in other Belgian regions as well as those abroad and used for housing are taken into account;
2) The purchaser must commit to establishing his primary place of residence in the purchased property within two years as from the registration date of the document giving rise to the perception of the proportional registration duty, in case that document has been submitted to the registration office within the term provided for that purpose; or as from the closing date for submission to the registration office, in case that document is submitted to the registration office after the term provided for that purpose has expired (this term is three years if it concerns an apartment or on plan) ;
3) The purchaser must commit to maintaining his primary place of residence in the purchased property during an uninterrupted duration of at least five years as from the date they have established their primary place of residence in the property for which they have obtained the reduction.
In case of non-compliance with condition n° 1), the purchase will be obliged to pay complementary duties on the amount of the reduction of the taxable base as well as a fine equal to these complementary duties. The same complementary duties and the same amount will be due when the purchaser does not comply with the commitment under n° 2). However, the amount will not be due when the non-compliance with the commitment is a result of force majeure. The same complementary duties and the same amount will be due when the purchaser does not comply with the commitment under n° 3), except in case of force majeure.
Furthermore, the reduction of the taxable base is not applicable when it concerns the purchase of a building site.
2. The tax reform expressly excludes from its application scope the purchase of housing accommodation of which the taxable base for calculating the registration duties is higher than 500.000 euros.
The Brussels government could have wished to make its Region fiscally more attractive for all, by granting a tax allowance to everybody. Nevertheless, the objective of the government is clear: « the freestanding villas in fancy neighbourhoods are excluded » (Doc. n° A-429/2 – 2016/2017, p.11). This means: chasing away the « rich » from the city….
The Government plans to tax the « wealthier » owner more, because he already owns another residential building, or because he wants to invest in a building with a value higher than 500.000 euros.
We could have understood that no advantage would be granted for the part of the price that is higher than 500.000 €.
But in this case, each advantage is lost as soon as the price exceeds 500.000 €, even for the part that is lower than that amount.
This is not the way to avoid the exodus of wealthy families towards the periphery.