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Donating Real Estate Cheaper in Flanders

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Donating Real Estate Cheaper in Flanders Lloyd Georgelaan 11 I 1000 Brussels www.berquinnotaries.be Donating real estate cheaper in Flanders Eric Spruyt, notary, prof. KU Leuven and Fiscale Hogeschool March 2016 The cost of donating property in Flanders has been drastically reduced. Those who carry out energy-saving renovation work pay even less. Since 1 January 2015, the registration and succession duties have been laid down in a new tax code, the ‘Flemish Tax Code’. Succession duties (successierechten) are now called inheritance tax (erfbelasting) and gift duties (schenkingsrechten) have been renamed gift tax (schenkbelasting). Far more important, however, is that since 1 July 2015, donating real estate has become far cheaper. The residence of the donor counts! The Flemish gift tax and its reduced rates for the donation of real estate (houses, land, apartments) only apply if the donation is located in the Flemish Region. The only criterion considered is the tax residence of the donor, at least when this person is an inhabitant of Belgium. The location of the donated property plays no role. If you live in Antwerp and you donate a house in the Ardennes, you can do this at Flemish rates. There are three exceptions to this principle: 1. You have moved frequently. If you, as a door, have lived in various regions in the past five years, then the place where you lived longest counts. 2. You live abroad. Then the location of the real estate counts. If you went to live in Spain when you retired and you want to donate your apartment in Liège to your son, then Walloon gift duties will be levied. 3. You donate a building on which energy-saving renovation work is then carried out. In this case, the rate will be even lower (see below), but the property must be in the Flemish Region (i.e. donor and property in Flanders). What is new? - Fewer categories: there are now only two categories: o rates for donations in the direct line/between partners (married couples, legally co- habiting partners and actually co-habiting partners who have lived together for one year without interruption) o rates for donations between all other persons (see table) - Fewer brackets - Lower rates: o in the direct line/between partners: in the lowest bracket you still pay 3 %, but up to a bracket of € 150,000 (previously up to € 12,500) o between other persons: a rate of 10 % up to € 150,000 (previously 20.25 or 30 % up to € 12,500) and the highest rate is now 40 % (previously up to 80 % for ‘outsiders’) Figures that appeal to the imagination … Single person donates in the direct line Anja donates an apartment in Ghent (value € 250,000) to her son Bart. Gift tax payable previously: € 26,625 Gift tax payable since 1/7/2015: € 13,500 A reduction of € 13,125 Brother donates to sister Karel donates a residence located in Anderlecht (value € 250,000) to his sister. Gift tax payable previously: € 121,875 Gift tax payable since 1/7/2015: € 35,000 A reduction of € 86,875 Sugar aunt donates to nephews Lies donates a rented apartment building consisting of two apartments, located in Kortrijk (value € 500,000) to her two nephews, half each in indivisible ownership. She retains usufruct, the nephews only receive bare ownership. The gift tax is calculated on the basis of two donations, each of € 250,000. The gift tax is calculated on the value in full ownership of the donated property. Donation from aunt Lies to nephew A: gift tax payable since 1/7/2015: € 35,000 Donation from aunt Lies to nephew B: idem: € 35,000 Total gift tax payable since 1/7/2015: € 70,000 Gift tax payable previously: € 268,750 A reduction of € 198,750 Addition reduction for energy renovation and rental of good-quality housing In addition to the general rate reduction, the Flemish government offers two tax incentives: - one in the event of energy-saving renovation of the donated real estate - one in the event of the rental of high-quality housing. In each case, this is a deferred reduction. Initially, you pay the usual (reduced) rate on the donation of the real estate. When it later appears that you fulfil the renovation/rental conditions, you can obtain an additional reduction and the tax authorities refund the difference. Conditions: - The donated property is located in the Flemish Region. For the additional reduction upon rental, it must be housing; for the energy renovation this is not required. - The person who receives it must have renovation work worth at least € 10,000, excluding VAT, carried out within five years of the date of the official deed of donation (e.g. a heat pump, solar boiler, etc) or obtain a certificate of conformity and conclude a registered lease for at least nine years within three years. And this period of nine years must actually be achieved, otherwise the tax authorities can reclaim the refunded gift tax! - For renovation: the work must be invoiced by a contractor who issues a certificate showing that the invoices actually related to one of the eligible types of work. - Your application for reimbursement must be with the tax authorities at the latest within six months after the end of the 5-year/3-year period. (In the case of renovation, you also include the invoices, with rental you include the certificate of conformity and the lease). However, you do not have to wait three or five years. As soon as the work is done or as soon as you have been able to rent out the donated property with a certificate of conformity, you can request the refund. Exemption for disabled persons For inheritance tax, there is an exemption for disabled children. This is now also applied if you donate to a disabled child/person. This is an allowance or threshold exemption, a reduction of the taxable base. The amount of the exemption depends on the degree of relationship between the donor and the disabled person. How does it work? - In the event of a donation to a disabled child/person in the direct line or between partners, the allowance is equal to the sum obtained by applying the following formula: (€ 3000) x age coefficient (depending on the age of the recipient of the donation). - For donations between all other persons, the allowance is equal to the sum obtained as follows: (€ 1000) x age coefficient. Appendix: new reduced Flemish basic rates (since 1 July 2015) TABLE I in the direct line and between partners portion of the donation A rate applicable to the total amount of the tax on the corresponding portion in column previous portions, in € bracket in € A, in % From up to and including 0.01 150,000 3 - 150,000.01 250,000 9 (6 with renovation/rental) 4,500 250,000.01 450,000 18 (12 with renovation/rental) 13,500 (10,500) 450,000.01 27 (18 with renovation /rental) 49,500 (34,500) TABLE II Rate between all other persons portion of the donation A rate applicable to the total amount of the tax on the corresponding portion in previous portions, in € bracket in € column A, in % From up to and including 0.01 150,000 10 (9 with renovation/rental) - 150,000.01 250,000 20 (17 with renovation/rental) 15,000 (13,500) 250,000.01 450,000 30 (24 with renovation/rental) 35,000 (30,000) 450,000.01 40 (31 with renovation/rental) 95,000 (78,500) ******************** Note: would you like more concrete information after reading this text? Unfortunately Berquin Notarissen cvba is unable to advise you by email. If you wish, you can phone to make an appointment with one of our lawyers or notaries..
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