Belgian legislator responds: VAT review period for “durable” renovations extended to 15 years
Belgian legislator responds: VAT review period for “durable” renovations extended to 15 years
Belgium is responding to the judgement it received last year in the Drebers case (C‑243/23, 12 September 2024) with a newly proposed law. Essentially, in the judgment it is decided that Belgian legislation is not in line with general VAT principles, as it did not consider the extended 15-year revision period to apply to renovations that constituted a significant extension and/or thorough renovation of a building and whose effects had an economic life comparable to that of a new building.
Under current legislation, the fifteen-year review period mainly applies to the purchase or construction of a new building. Major renovation works and extensions are in principle subject to the shorter five-year revision period, unless the works are so extensive that they result in a “new building”. However, a new building only exists if there are major changes to the structure, nature and purpose of the building. In practice, the shortened limitation period therefore applies to most renovations.
This is now set to change. The proposal of law extends the scope of the fifteen-year review period to services that “exhibit characteristics that are usually attributed to immovable business assets”. In line with the provisions of the Drebers judgment, an economic test is proposed: do the works have an economic life comparable to that of a (new) building? If so, the fifteen-year review period will apply from the date of entry into force. In our opinion, however, this leaves much room for discussion and interpretation.
In line with the Drebers judgment, the explanatory memorandum to the bill cites the following potential assessment criteria – for example, construction work that:
Reference is also made to a circular letter yet to be published by the Belgian VAT authorities which will provide more clarity. We hope that this will be published soon and that the administration will use it to address the current lack of clarity and differences in interpretation. Would you like to assess the impact of this new legislation for your activities or would you like us to carry out an analysis for you?
Our VAT experts are ready to assist you:
Under current legislation, the fifteen-year review period mainly applies to the purchase or construction of a new building. Major renovation works and extensions are in principle subject to the shorter five-year revision period, unless the works are so extensive that they result in a “new building”. However, a new building only exists if there are major changes to the structure, nature and purpose of the building. In practice, the shortened limitation period therefore applies to most renovations.
This is now set to change. The proposal of law extends the scope of the fifteen-year review period to services that “exhibit characteristics that are usually attributed to immovable business assets”. In line with the provisions of the Drebers judgment, an economic test is proposed: do the works have an economic life comparable to that of a (new) building? If so, the fifteen-year review period will apply from the date of entry into force. In our opinion, however, this leaves much room for discussion and interpretation.
In line with the Drebers judgment, the explanatory memorandum to the bill cites the following potential assessment criteria – for example, construction work that:
- has lasted several years;
- considered as a whole, has led to a major renovation of a building;
- has expanded the building;
- is significant in terms of cost;
- has given rise to consequences which, particularly in view of their scale, have the same economic life as a new building.
Reference is also made to a circular letter yet to be published by the Belgian VAT authorities which will provide more clarity. We hope that this will be published soon and that the administration will use it to address the current lack of clarity and differences in interpretation. Would you like to assess the impact of this new legislation for your activities or would you like us to carry out an analysis for you?
Our VAT experts are ready to assist you:
- Brigitte Braeckmans: brigitte.braeckmans@bdo.be
- Pascal Dauw: pascal.dauw@bdo.be
- Erwin Boumans: erwin.boumans@bdo.be