What you need to know about the new registration tax

Today, anyone who buys a family home pays a 6 percent sales tax. That would be 3 percent. This is good news for first-time owners. It does not matter whether you are going to buy a house, apartment or villa. A “family home” is the only home or apartment in which the buyer will live.

For an apartment of 250 thousand euros, the reduction in the registration fee leads to a saving of 7,500 euros.

Conditions have long been linked to the low rate of the family home. The biggest pitfall is that you are not allowed to be a full owner of another home or building plot. “If you have other properties, you will get a preferential rate if the other properties are sold during the year,” says Flemish Housing Minister Matthias Depinelli (N-VA).

In addition, you must live at the address within two years. Can’t make this date? Not only do you then have to pay the difference between the registration tax already paid and the sales rate of 12 percent, but you also have to pay an additional penalty on that amount. Only in the case of force majeure can you evade these penalties.

You can get an additional tax deduction for your “modest” home only. It is a house or apartment with a maximum purchase price of €200,000. For homes in 16 core cities – including Antwerp, Ghent, and Leuven – or the Flemish perimeter around Brussels, the limit is €220,000. As the registration fee payable is reduced by half, the additional discount is also halved, from €5,600 to €2,800.

The reduction in the registration fee is not limited to the first home, but also applies to subsequent family homes (after the first home is sold). But there’s also bad news: Anyone who sells a family home first to purchase another will not be able to enjoy the registry transfer possibility from 2024. This means that prepaid registration fees can no longer be deducted from the registration tax on new purchases. The portability benefit can be up to 13,000 euros.

There will be a transitional arrangement until the end of 2023, and buyers can choose between a reduced rate of 3 percent and the possibility of transferring with a 6 percent registration fee. The most economical option depends on the situation.

We highly encourage the purchase of an older home that has undergone an active and extensive renovation. The registration fee rate will decrease from 5 to 1 percent. For those who buy a house for 250,000 euros, this provides an advantage of 10,000 euros.

Moreover, the discount can be added for those who buy a house with a maximum of €200,000 (€220,000 in the core cities). The amount drops, in proportion to the new low price, to 960 euros. The idea is that we will continue to exempt the same segment of the purchase price from the registration tax,” says Dependael. Anyone who buys a house for €200,000 has an advantage of €4,160 under the new scheme. However, the renovation must meet a number of conditions.

Anyone who buys land to build on will soon be worse off. You must pay the registration fee on the purchase price of the construction land. This rate will increase from 10 to 12 percent. 21% VAT must be paid on construction work. The reduced VAT rate of 6 percent is being implemented across the country until the end of 2022 for the demolition and rebuilding of the single and owner’s home.

Remarkably, new construction is now being penalized as the focus is on energy efficiency. However, newly built homes must meet stringent energy requirements.

For properties other than the family home, the registration fee is 10 percent. That would be 12 percent. This increases the tax on the purchase of a second residence, a house, an apartment for rent, an office, a store or a warehouse. Would you buy a second home for 300 thousand euros? Increasing the registration fee payable from 30 thousand euros to 36 thousand euros.

“Existing favorable arrangements for social housing and for protected monuments will remain unchanged,” says Dependail.

“Real estate prices are definitely not going to drop,” says Krijgsman. Many other experts share this view. “Increasing the registration fee from 10 to 12 percent is not going to make investors stop buying,” says Frédéric Vandenhende of Investr, a platform for real estate investors. Young families will receive support from this measure, but the question is whether this will not be reflected in prices.

Due to the new rules, the pressure on the market may increase. For first homes, this will happen after January 1, 2022. It will be a very interesting period for second home sellers until the rules go into effect, says Cedric Vanhenckthofen, Heylen Vastgoed’s manager.

Whether the sale is made before or after January 1, 2022 depends on signing the deed of purchase with a notary.

Family home buyers will only want their purchase contract to expire after the new year, in order to take advantage of the discount. Whoever reaches an agreement with the seller today can in theory benefit from the lower registration fee. The maximum term for signing a sales contract is four months, says civil notary Bart van Opstal, a spokesperson for notaris.be. Buyers of a second home or investment property will want to execute their sukuk before the new regulation.

There is a lot of work being done in the investment market. But the rental market must remain attractive in order to keep rents in check,” says Philip Dewaele, Managing Director of Dewaele Vastgoed.

There is a huge shortage of affordable rental housing. How will the Flemish government prevent rental housing investors from giving up?