Reduced VAT for demolition-reconstruction of rental properties

The federal government has decided to extend the 6% VAT rate on demolition and reconstruction work to rental properties in the hope of stimulating the constructino of affordable housing. This decision will have a significant impact on future investments, in particular for larger infrastructure projects.


In 2020, Belgium introduced a temporary VAT rate of 6% for the demolition and reconstruction of residential buildings that was to expire in 2023.

In October last year, the government decided to make the 6% VAT rate permanent but only for private individuals who did not own any other property and only for private projects of up to 200 m². This excluded developers and investors who developed properties for sale or for rent. In practice, this meant the end of the 6% VAT regime as it is unlikely that private individuals would buy a property to demolish and build a new property that is smaller than 200m²; a renovation was more interesting.

The government has decided to extend the 6% VAT rate on demolition and reconstruction to rental properties.

This decision was driven by the need for new rental properties for families and singles, the Finance Minister explained. Developers or investors who redevelop properties in view of residential letting will still qualify for the 6% VAT rate. Developers who demolish and reconstruct in order to sell remain excluded. Private individuals who buy a rebuilt house or flat will have to pay 21 % VAT.

To benefit from this reduced VAT rate, the property must be let by the developer-owner to individuals who will use it as their main residence, with a surface under 200 m², and the property must be let for at least 15 years (under one or successive lease agreements).

The government hopes to encourage the construction of affordable housing while modernizing the housing stock.