No 2% real estate transfer tax on conversion if pipework is still absent
The ‘s-Hertogenbosch Appeal Court has ruled that the reduced real estate transfer tax rate does not apply when acquiring a ballet studio ‘in the process of conversion’.
Issue of law and interest
The reduced real estate transfer tax rate for residential property applies to a property that, according to its structural nature (design and characteristics), is intended for residential use at the time of acquisition. This case relates to the question of whether the reduced rate also applies to the acquisition of a former ballet studio that is being converted into a home.
The Court of Appeal ruled that the general real estate transfer tax rate (6%) applies, because the property was, in its nature, not intended for use as a residential property at the time of acquisition. The Court of Appeal thereby takes account of the fact that the absence of the pipework for a kitchen and sanitary provisions meant that the purchased property did not have all the structural characteristics of a residential property at the time of acquisition.
Because the exact facts and circumstances at the time of the purchase determine whether the 2% rate applies, it can be worth postponing the transfer of ownership until the conversion work has progressed to the point where it does constitute a residential property. One indication might be whether the pipework for the kitchen and sanitary provisions is already present. With regard to the conversion of offices into homes, The Hague Appeal Court previously ruled that the reduced rate applies if the office building has been fully stripped internally, the demerger into apartment rights has taken place, and the building work has started.
If you have any further questions on this issue or would like to receive more information, please contact Jérôme Germann, Jérôme Ariës or your trusted adviser at the Loyens & Loeff Real Estate Tax Team.