Indirect Tax News - March 2021

Demolition and reconstruction - Temporary extension of the reduced VAT rate

Since 2007, a reduced VAT rate of 6% is applicable to the ‘demolition and reconstruction of private dwellings located in one of Belgium's 32 major cities.

This beneficial VAT rate is now temporarily extended to the rest of the Belgian territory. It not only applies to the demolition and reconstruction of houses and flats to be mainly used as a ‘domicile’ by the builder/buyer but also to properties destined to be leased long-term to or via a ‘social rental’ agency. Remarkably, it will now also be possible to apply 6% VAT on the ‘sale’ of reconstructed properties and adjacent land (for example, by real estate developers). Specific conditions, restrictions (for example, maximums regarding square metres), and formalities have to be satisfied.

With this temporary measure, which is applicable from 1 January 2021 through 31 December 2022, the government seeks to mitigate the economic impact of the Coronavirus crisis on the construction sector, while pursuing social and ecological objectives.

Reduced VAT rate for bars, restaurants, and hotels to be re-evaluated

The temporary VAT reduction (to 6%) for food and non-alcoholic beverages served in bars, restaurants, and hotels (introduced in June 2020) ended on 31 December 2020. As bars and restaurants are currently closed due to confinement rules and a reduced VAT rate applies for take-out, the financial impact is deemed to be minimal. The Belgian government may reconsider VAT rate reductions when bars, restaurants, and coffee shops gradually re-open.

Zero rate for COVID-19 vaccines

Following the initiative of the European Commission, Belgium has implemented a temporary (from 1 January 2021 through 31 December 2022) 0% VAT rate for the supply, the intra-Community acquisition, and the import of COVID-19 vaccines and in vitro diagnostic devices used to monitor the virus, as well as services that are closely related to the before-mentioned vaccines and medical aids.

Pascal Dauw

Mazen Al Haffar