Federal government reaches agreement on reduced VAT rate for demolition and reconstruction of rental properties

On March 20, 2024, the federal government approved the reduced VAT rate of 6% for demolition and reconstruction projects followed by construction of rental housing. This reduced rate (6% instead of 21%) already applies to individuals who demolish and rebuild their homes.

With this measure, the government is responding to calls in the rental market, which is also struggling with a shortage of affordable housing. Finance Minister Vincent Van Peteghem does attach some conditions to this reduced rate:

• the habitable area should not exceed 200 square meters
• the residents (in this case the tenants) must be domiciled there (second homes and vacation homes are thus excluded)
• the property must be rented for at least 15 years (but not necessarily by the same tenant). Thus, the property may not be sold.

Noteworthy: the reduced VAT rate for landlords is not only being reintroduced, but expanded. Indeed, the preferential rate is no longer limited to 32 Belgian cities (in the fight against dilapidation), but applies to the entire Belgian territory. The new scheme thus parallels the single, limited preferential rate the federal government retained for individuals last year.