Tax reduction for waiver of rent – Law published in Belgium Official Gazette
A new legislative initiative to stimulate the waiver of real estate leases in response to the COVID-19 pandemic, has been adopted in the “Law of 2 April 2021 on temporary support measures due to the COVID-19 pandemic”, which was published in the Belgian Official Gazette of 13 April 2021.
The new law introduces a specific income tax stimulus for landlords of commercial immovable property who decide to voluntarily and definitively waive (part of) the rent over the months March, April and/or May 2021. The law aims to further stimulate landlords to waive (part of) the rent and help lessees overcoming liquidity issues.
Furthermore, the government has decided on May 18, 2021 to expand this regime to the rent over the months June, July, August and September. Further details on this expansion (e.g. whether the thresholds below will be increased) are still to be expected.
Landlords/individuals are granted a tax deduction while landlords/companies can benefit from a non-refundable tax credit.
The tax benefit amounts to 30% of the waived rent and lease incentives, without exceeding the following thresholds:
- €5.000 per month per lease agreement;
- €45.000 per lessor/landlord for all the lease agreements together.
In order to benefit from this exemption, several conditions must be fulfilled, including a.o.:
- The immovable property is located in Belgium and allocated to the business activity of the lessee;
- The lessee is a self-employed private individual or qualifies as an SME or small association and is registered as ‘active’ in the Crossroads bank of Enterprises;
- The establishment located at the leased property was obliged to close its doors as a result of the Covid-19 measures;
- The waiver amounts to at least 40 % of the monthly rent;
- The exemption cannot be applied if both parties have a direct relationship (spouses, children, company director,…).
As to the formalities which need to be fulfilled, the law indicates that the waiver should be recorded in a written agreement and subsequently sent to the tax authorities at the latest by July 15, 2021.
Similar as to other support measures, the benefit will not be applicable if the tenant qualifies as a company in difficulties at the time of the waiver. Furthermore, there cannot be any outstanding rent on March 12, 2020.
What are the implications for you?
If you are a party to a commercial lease arrangement, we recommend you to consider the implications of the tax benefit in your specific situation. Hereby, it is also useful to consider the VAT as well as the commercial law implications of a waiver.
How can we help you?
We keep on monitoring further developments and keep you informed if more practical guidelines would become available. In the meanwhile, if you have any questions on the above topic, we would be happy to assist you and feel free to contact your trusted KPMG advisor.