Reduced VAT rate for the purchase and construction of social housing

Reduced VAT rate for the purchase and construction of social housing

On 18 December 2015, the Council of Ministers approved the draft Royal Decree for broadening the scope of application of the reduced VAT rate for housing within the social policy context. The draft has been turned over to the Council of State to receive its opinion, and so the definitive text has not yet been published.

Current regulation     

The current Royal Decree no. 20 (table B, section X) provides for a reduced VAT rate of 12% for the purchase and construction of goods intended for housing within the social policy context.

However, this only applies to private residences that are delivered and invoiced to a limited number of persons, including the provinces and municipalities, local public social welfare centres and intermunicipal utility companies, with a view to social housing. Private individuals are not covered by this and so are not eligible for the reduced VAT.

Draft Royal Decree

By means of the decree announced by the Council of Ministers, the reduced VAT rate of 12% would also become expressly applicable to every natural person or legal person who buys or builds a residence in order to rent it out within the social policy context. The scope of application would include both private individuals and real estate developers as well as every other private-law person.

We will keep you informed if the Royal Decree is published. For more information on this topic, you can consult Ewoud Willaert and Nel Van Daele (authors).