In order to address the shortage of social housing, the Federal Government has introduced, as from 1 January 2017, a new reduced VAT rate of 12% which applies to private investments in social housing. Under certain conditions, private investors who buy, build, renovate or lease a house or a housing complex for rental within the framework of social policy will now also benefit from a reduced VAT rate of 12%.


Until recently, only certain public institutions, including public social welfare centres ("OCMW"/"CPAS"), municipal associations and municipalities, could benefit from a reduced VAT rate of 12% for investments in social housing. For recognised social housing associations, this rate was even further reduced to 6% in 2007.

Social rental offices and private investors who rented a house to one of the above-mentioned public institutions, however, could not benefit from a reduced rate, as the reduced rate only applied if the invoice (for the purchase, building, etc.) was addressed directly to one of the beneficiary institutions.

This situation has now been changed. Henceforth, private investors who buy or build a house or a housing complex with a view to renting it within the framework of social policy will also benefit from a reduced 12% VAT rate. This applies to individuals, real estate developers, and any other private-law person.

Broad scope of application

The new 12% VAT rate is applicable to the supply of buildings (and, possibly, the accompanying land), the grant and (re)transfer of rights in rem relating to these buildings, construction works and the VAT lease.

As is the case for other reduced rates in the construction industry, the following services inter alia are excluded from the reduced rate and are subject to the ordinary rate of 21%: cleaning, works relating to the land, garden landscaping, building fences, works to swimming pools, saunas and tennis courts.

Qualifying tenants

The application of the reduced rate requires that the house or housing complex is rented to a qualifying public or private legal person who, in turn, rents it out.

More specifically, this means:

  1. institutions that could already benefit from the existing reduced VAT rate, as well as social rental offices and all other public or private legal persons with social purposes that are recognised by the competent authority; and
  2. the public or private legal persons who are responsible for the management of recognised homes for the elderly, boarding schools, reception homes, etc. and which could already benefit from a reduced rate under Section X, §1, A, d) of Schedule B of Royal Decree no. 20.

Furthermore, the new reduced rate also applies in cases where the private investor enters into a management agreement with one of the institutions mentioned under (i) and, in that context, directly rents the house to the end user.

It should be noted that, in the latter situation, the reduced rate only applies where the institutions mentioned under (i) intervene. According to the literal wording of the act, private investors who rent a housing complex in the framework of a management agreement with the institutions mentioned under (ii) cannot benefit from the reduced rate. In the parliamentary preparation, no further clarification as to this distinct treatment was given, which raises the question whether or not this treatment is discriminatory.

Minimum rental period

The rental agreement must be concluded for a period that ends at the earliest on 31 December of the fifteenth year following the year of first use of the house/housing complex. If this minimum period is not respected, a proportional reimbursement of the advantage received will be due.


The reduced rate can only be applied when certain formalities are complied with. For example, before any VAT becomes due, a private investor must make a declaration to the competent VAT office, confirming that the house or housing complex will be rented out within the framework of social policy. A copy of the declaration must then be delivered to the seller, who must mention this on his invoice.

What about the existing reduced rates?

In certain cases, private investors could already benefit from a reduced rate, based on a broad administrative interpretation of existing reduced VAT rates. For example, private investors can invest in service flats under the 12% rate, provided that certain conditions are met, and owners of recognised homes for the elderly can renovate at 6% VAT, even though the homes are managed by an external manager who rents the premises from the owner.

The question arose whether the new 12% rate for private investments replaces these applications of the existing reduced rates. In reply to a question in Parliament, the Minister of Finance has now confirmed that the introduction of the new regime has no consequences for the existing reduced VAT rates and their interpretation as given in existing administrative guidelines.