Reduced VAT rate for demolition and reconstruction (temporary measure) extended until June 30, 2025
Usually, the VAT rate for constructing a new home is 21%. However, those who demolish an old house and build a new one on the same plot can, under certain conditions, benefit from a reduced VAT rate of 6%. Until recently, there were two separate schemes for this:
- Urban scheme: A permanent scheme applicable since 2007 in 32 cities, with no social conditions. It only required that the demolition and reconstruction occurred within designated urban areas. This measure applied only to works on immovable property (and not to the sale of reconstructed homes).
- Temporary scheme: A nationwide measure introduced during the COVID-19 pandemic, allowing the reduced 6% VAT rate outside urban areas under certain social conditions. This scheme expired on December 31, 2023, and applied to both works on immovable property (demolition and reconstruction) and the sale of reconstructed homes.
From January 1, 2024, a new permanent scheme applies across Belgium. The VAT reduction is now primarily applicable to demolition and reconstruction works carried out for an individual’s sole and principal residence (subject to specific conditions). The reduced rate also applies to social rentals, such as through a social rental agency. As of June 1, 2024, the scheme has been expanded to include homes intended for rental for at least 15 years to individuals who immediately establish their residence there.
Two measures ended on January 1, 2024: the 32 cities scheme and the reduced rate for the sale of reconstructed homes. However, a transitional arrangement allows the continued use of these measures until the end of 2024, provided certain conditions are met, such as applying for a building permit before July 1, 2023 (for the sale of reconstructed homes) or January 1, 2024 (for the 32 cities scheme).
Due to delays caused by exceptional circumstances like heavy rainfall, the transitional arrangement has been extended by six months, now running until the end of June 2025. This extension provides builders and developers additional time to complete their projects while retaining the 6% VAT rate.
The Act extending the transitional arrangement for applying the reduced 6% VAT rate for the demolition and reconstruction of homes, dated December 10, 2024, was published in the Belgian Official Gazette on December 24.