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Introduction of new rules on immovable rent on 1 January 2019

On the 25th of October the long expected new law regarding the optional VAT regime for immovable rent was published. Besides the introduction of the new optional regime, the law introduces a mandatory VAT taxation for the short term rent of immovable property.

A lot has already been written about the introduction of the option to subject immovable rent agreements to VAT. However, as the optional regime will only apply to buildings that are newly constructed as from 1 October 2018 onwards (exception for warehouses), it will still take some time before the first office building is rented out with VAT under the new optional VAT regime.

As it was the intention of the government to stimulate the logistical sector on the short term, some important measures were introduced with respect to the rent of warehouses. Not only was the definition of “warehouses” broadened, the legislator also foresaw that the new optional VAT regime can also apply for all the warehouses (so also the warehouses that were constructed already before 1 October 2018). These changes will result in the possibility to subject more warehouse rent agreements to VAT as from 1 January 2019 onwards.

If you currently rent (in or out) a warehouse without VAT, it might be possible to subject the rent agreement to VAT as from 1 January 2019 onwards. This will possibly create the opportunity to recover part of the historic VAT that was not recovered on the construction or acquisition of the warehouse in the past. New warehouse rents to non-VAT taxable tenants will be mandatory subject to VAT as from 1 January 2019 onwards.

Do not forget that the new law also introduces on 1 January 2019 a mandatory VAT taxation for short term rent of real estate (both buildings and land). This may be relevant for companies renting pop-up stores, fair- or exposition space or seminar rooms. Short term has been defined as not exceeding 6 months. A number of exceptions have been foreseen to avoid an extra VAT charge to private individuals and non-for-profit organizations.

Should you require further assistance in this matter, please contact your local KPMG Tax Adviser.

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Veerle Coussee

Indirect Tax

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