In a recent ruling (VB 23055) by the Flemish Tax Administration (Vlabel), the complexity of tax legislation surrounding the reduced 2% registration duty for the purchase of a sole and primary residence in Flanders is highlighted. This case underscores the need for buyers to be cautious about potential tax abuse when seeking to benefit from the reduced rate. In this context, it is worth noting that the registration duty in Flanders was reduced from 3% to 2% in 2025.
Context of the Reduced 2% Sales Duty
The reduced 2% registration duty is an incentive for purchasing a sole residence in Flanders, designed to support (young) buyers in an increasingly challenging housing market. However, to qualify for this benefit, buyers must not hold full ownership of any other real estate at the time of purchase. This policy aims to make the housing market more accessible and to discourage speculation.
For clarity, we would like to emphasize the conditions that must be met to qualify for the reduced registration duty rate when purchasing a home.
Purchase by a Natural Person: Only natural persons can benefit from the reduced registration duty rate. Purchases by legal entities are not allowed. In cases where both natural persons and legal entities jointly purchase a property, only the portion owned by the natural persons qualifies for the reduced rate.
It Must Be a Pure Purchase: This refers to a sale transaction where the seller transfers the real estate in exchange for a monetary payment. Transactions such as exchanges or the withdrawal of real estate from a company are excluded from the reduced rate.
Acquisition of Full Ownership: The buyer must acquire full ownership of the property. Acquiring only an undivided share of a property, bare ownership, or usufruct is not sufficient.
Purchase of a Primary Residence: The property must be designated as a residence, meaning it should be used for housing a family or individual, either immediately or after standard maintenance or repairs. Building plots do not qualify for this reduced rate.
Purchase of the Sole Residence: The buyer must not fully own any other residential property or building plot. If they do, this is considered "preclusive possession," which disqualifies them from the reduced rate. In this specific case, this was the issue.
Registration in the Population Register: The buyer must register at the address of the purchased property in the population or foreigner’s register within three years of signing the notarial deed.
Decision VB 23055: Is Selling Preclusive Possession Considered Tax Abuse?
In a specific case, a man and a woman intended to jointly purchase a home with the goal of benefiting from the reduced registration duty rate. The man owned 1% of a building plot, while the woman owned the remaining 99%. As a result, the man did not meet the conditions for the reduced rate. The plan was for the man to transfer his 1% share to the woman, making her the sole owner of the building plot. This transfer would ensure that the man would no longer be considered the owner of another property at the time of the new purchase, thereby qualifying him for the reduced 3% rate.
Vlabel’s Interpretation and Decision
Vlabel carefully assessed this strategy in light of the anti-abuse provisions outlined in the Flemish Tax Code (VCF). The crux of the matter revolved around the intention behind the transfer of ownership of the building plot and whether this action could be classified as tax abuse.
Vlabel’s decision highlighted that the reduced rate is primarily intended to promote the purchase of a sole family home and not to secure tax benefits through artificial constructions. Although the man would no longer own real estate at the time of the new purchase due to the transfer of his share, the timing and nature of this transfer were viewed by Vlabel as a strategy primarily aimed at obtaining a tax advantage. This led to the conclusion that the action constituted tax abuse, resulting in the couple being required to pay the standard rate of 12% instead of the reduced 2% rate.
Decision VB 23087: Is Selling Preclusive Possession Not Always Considered Tax Abuse?
In another ruling, Vlabel indicated that the sale of preclusive possession is not always regarded as tax abuse. In this case, a married couple intended to sell their family home as well as a studio they fully owned, with the goal of purchasing a new family home. Notably, the studio was to be sold to the company where both spouses were the sole shareholders.
Vlabel concluded that this situation did not constitute tax abuse, based on the following civil-motives:
The couple intended to use the sale proceeds from their apartment to finance the purchase of the (new) family home.
By doing so, they avoided the need to take out an (additional) higher loan, particularly considering that interest rates at the time of purchase were high.
A substantial loan had already been required, and it was uncertain whether the bank would agree to grant an even higher loan amount.
Important Considerations for Potential Buyers
These decisions highlight the importance of non-tax motives and the need to respect the intent behind tax legislation. Buyers considering acquiring real estate and benefiting from tax-favorable regimes should carefully assess whether their actions align with the spirit of the law and whether sufficient non-tax motives are present. It is strongly recommended to seek legal advice in advance to avoid unintended tax consequences.
Vlabel's rulings serve as a reminder that the path to tax benefits must be navigated with care, requiring a thorough understanding of the legislation and a clear alignment of legal actions with the objectives of the tax rules. This is especially pertinent in a time when the real estate market is increasingly scrutinized.
Are you planning to purchase new real estate and have questions about preclusive possession? Feel free to book an appointment with us, no strings attached.
Christophe Romero Senne Verholle
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