7% real estate transfer taxes in the case of a purchase of a sole dwelling

The purchase of a dwelling by an individual who does not yet own a dwelling or building land shall be subject to real estate transfer taxes of 7% (as opposed to 10% before 1 June 2018) should this individual register such dwelling as his domicile in the population registry within two years.

In order to benefit from the exemption, the following conditions have to be fulfilled: 

  • the immovable property is located in the Flemish Region;
  • the purchaser is an individual / natural person;
  • the immovable property is or will be mainly dedicated to housing (to the exclusion of building lands);
  • the transaction has to be a purchase in the strict sense (to the exclusion of transfers which do not strictly constitute a sale, but are considered as such for the application of real estate transfer taxes, e.g. an exchange);
  • the purchaser acquires 100% of the full ownership of the immovable property;
  • the purchaser registers the dwelling as his domicile in the population register within two years;
  • the purchaser does not yet own a dwelling or building land, unless that dwelling or building land is sold within one year; and
  • the purchaser has to include the required "pro fisco" declarations in the notarial deed of purchase.

If there are multiple purchasers, these conditions are to be assessed at the level of each purchaser, it being understood that a purchaser can pro parte benefit from the real estate transfer tax of 7% even if his co-purchasers do not meet the above conditions.

Moreover, the rate of 7% is reduced to:

  • 6% in case the purchaser commits to perform substantial energetic renovations; or
  • 1% in case the dwelling is considered as a protected monument and the purchaser commits to reinvest the resulting advantage (6% of the purchase price) in the conservation of this monument.

In case the value of the dwelling being transferred with application of the real estate transfer taxes of 7% or 6% is not higher than 200,000 EUR (or 220,000 EUR if the immovable property is located in specific areas with high-density housing), the individual can benefit from an additional tax allowance of 5,600 EUR (7%) or 4,800 EUR (6%).

10 % real estate transfer taxes in all other cases

In principle, all purchases of immovable property which do not qualify for the reduced rate, remain subject to the rate of 10%. This is amongst others the case for purchases:

  • by legal entities such as companies or associations (unless they benefit from the rate 4% due to qualifying as a "professional purchaser");
  • by individuals, if it concerns the purchase of (building) land, a forest, a garage, a property destined for professional use, an investment property, a second residence, etc.

Reduced rate for "modest" habitations and tax allowance ("abattement") abolished

Note that pursuant to this reform, the previously applicable reduced rate of 5% (as opposed to 10%) when purchasing a "modest" house (i.e. a house with a cadastral value below 745 EUR) has been abolished. This is also the case for the tax allowance ("abattement"), which provided for a reduction of the taxable base of the real estate transfer tax in an amount of 15,000 EUR or 25,000 EUR.

This article is part of the Real Estate Quarterly - July 2018.