13 December 2019

The optional VAT regime for real estate rental entered into force on 1 January 2019  (see Eubelius Spotlights September 2018 and Eubelius Spotlights June 2019). This means that, in a B2B situation, it is possible – under certain conditions – to opt to charge VAT on the renting out of immovable property, which then allows the landlord to deduct the input VAT paid on the construction costs. A new Royal Decree now determines how this option must be exercised.

Background

On 1 January 2019, the optional VAT regime for the renting of real estate was introduced. One of the conditions for the application of the new regime is that both the landlord and the tenant must jointly opt to make the rental agreement subject to VAT. The legislator has given the King the power to determine the details for the application for this option.

In anticipation of the necessary implementing decree, it was clarified in the Explanatory Memorandum that a pro fisco declaration in the rental agreement would be sufficient to demonstrate vis-à-vis the tax authorities that the option had been jointly exercised. A recently published Royal Decree now finally regulates the way in which the option to make the rental agreement subject to VAT must be exercised.

Declaration

The optional adoption of the VAT regime must be formalised through a declaration signed by the tenant and the landlord at the latest upon the entry into effect of the rental agreement.

This declaration must contain the following information:

  • Name, address and VAT number of the tenant and the landlord,
  • Identification of the building or the part thereof and (if applicable) the accompanying land;
  • The expression of will of the parties to subject the rental contract to VAT; and
  • The date on which the option takes effect.

The inclusion of the above information in the rental agreement constitutes a valid declaration. In the case of the tacit renewal of a rental agreement, no additional declaration is required for VAT purposes.

The new formalities will enter into force with retroactive effect on 1 January 2019. However, parties who have already entered into a rental agreement which they wanted to make subject to VAT have until 29 February 2020 to regularise their situation. They can do this either by drawing up a separate declaration or through an addendum to the rental contract which includes all the necessary details.