From 1 July 2025, Belgium will implement a permanent reduced VAT rate of 6% on newly reconstructed buildings intended for residential rental purposes. This measure, introduced through the Program Law of 18 July 2025, represents a major shift in Belgium’s VAT treatment of demolition and reconstruction projects.
The change is expected to have significant implications for real estate investors, developers, and constructors, reducing the VAT burden from the standard 21% rate to 6% in qualifying cases.
Background: VAT on Demolition and Reconstruction
Belgium’s VAT framework has long distinguished between renovations, reconstructions, and new builds, often applying the standard 21% VAT rate to substantial projects. While temporary measures had previously allowed reduced rates in some regions or under certain conditions, the new policy marks the first permanent nationwide reduction for reconstruction projects linked to residential rental.
By reducing VAT to 6%, the Belgian government aims to encourage housing development, make residential rental investments more attractive, and provide clarity to the real estate market.
Conditions for the Reduced 6% VAT Rate
The reduced rate is not automatically applied, it comes with strict eligibility requirements that businesses must meet to benefit.
1. Purpose of the Property
- The reconstructed building must be intended for residential use, specifically for personal residence or long-term rental.
- Short-term rental or commercial use does not qualify for the reduced rate.
2. Eligible Buyers
- The reduced VAT applies when the property is sold to private individuals or legal persons who will use it as a residence or make it available under long-term rental agreements.
3. Habitable Surface Area
- Specific conditions apply to the size of the habitable surface area. Properties that exceed certain thresholds may not qualify for the reduced rate.
4. Rental Duration
- Long-term rental commitments are required. The reduced rate does not apply to properties intended for short-term leasing models such as holiday rentals or temporary lets.
Documentation and Compliance
To benefit from the 6% VAT rate, both suppliers and buyers must comply with new administrative requirements:
- A joint electronic declaration must be submitted, confirming that the property meets the qualifying conditions.
- Supporting documents, including contracts and proof of intended residential use, must accompany the declaration.
- Developers, constructors, and buyers must maintain proper records to demonstrate compliance in case of future audits.
Implications for Real Estate Investors
The VAT reduction from 21% to 6% has the potential to transform investment strategies in Belgium’s property market.
- Lower Acquisition Costs
- Investors purchasing newly reconstructed residential buildings will face significantly lower upfront VAT costs.
- Improved Profitability
- Reduced VAT improves net returns, making residential rental projects more attractive compared to other asset classes.
- Reassessment of Projects
- Developers and constructors are encouraged to reassess ongoing and future projects in light of the new rules, particularly to ensure eligibility based on surface area and intended rental use.
- Wider Market Impact
- The reduced VAT rate is likely to stimulate demand for reconstruction projects, boosting activity across construction, real estate, and rental markets.
Example Scenario
A developer reconstructs an apartment building in Brussels for long-term rental purposes:
- Before 1 July 2025:
- Standard VAT of 21% applied.
- On a project worth €5 million, VAT costs totalled €1.05 million.
- From 1 July 2025:
- Reduced VAT of 6% applies.
- VAT costs fall to €300,000, a saving of €750,000.
Such reductions can significantly alter the financial feasibility of projects, encouraging investment in residential rental housing.
Strategic Considerations for Businesses
For Developers and Constructors
- Review project portfolios to identify reconstruction projects that could qualify under the new rules.
- Recalculate financial models to reflect the reduced VAT burden.
- Ensure contracts and declarations are prepared in compliance with the new administrative requirements.
For Real Estate Investors
- Consider expanding into reconstruction projects with residential rental potential.
- Factor in reduced VAT costs when assessing investment returns.
- Work closely with tax advisors to confirm eligibility and avoid disputes with the Belgian tax authorities.
Broader Policy Objectives
The measure reflects Belgium’s broader policy goals:
- Encouraging sustainable housing development by reducing costs associated with reconstruction.
- Promoting residential rentals to address housing shortages and provide affordable housing options.
- Providing certainty to the real estate market with a permanent, rather than temporary, reduced VAT framework.
Key Takeaways
- From 1 July 2025, a permanent 6% VAT rate applies to newly reconstructed buildings for residential rental in Belgium.
- The reduced rate replaces the standard 21%, significantly lowering costs for eligible projects.
- Conditions include residential use, eligible buyers, habitable surface limits, and long-term rental commitments.
- A joint electronic declaration with supporting documents is required to claim the reduced rate.
- Real estate investors, developers, and constructors should reassess projects and strategies to take advantage of the new rules.
Final Thoughts
Belgium’s decision to make the 6% VAT rate on reconstructed residential buildings permanent marks a major shift in the country’s VAT policy. By reducing the tax burden on qualifying projects, the government is encouraging investment in the residential rental market and providing greater clarity for developers and investors.
For businesses, this is both an opportunity and a compliance challenge. The financial savings are significant, but success depends on careful project assessment, accurate documentation, and strict adherence to the eligibility rules.
In short: the reduced VAT rate is a game-changer for Belgian real estate, one that rewards compliance, planning, and strategic investment.
