The past few years have proven fruitful for investors
diversifying their property portfolios with commercial real estate.
These investments offer better financial returns than
residential properties and are typically good hedges against
inflation.
In Belgium, logistics property investments dominate the real
estate market. The demand for warehouse space in the country grew by 17.5% in 2021 despite limited
availability.
In addition, land scarcity and high construction costs are
driving up the prices of monthly rentals.
Would you like to take advantage of this boom by buying
commercial real estate in Belgium? Are you aware of the
country’s transfer costs, taxes, and exemption
requirements?
Read on for our guide to buying and selling commercial
properties in Belgium. We’ll answer these questions and more,
so you can make informed decisions on how to grow your capital.
2022 REAL ESTATE MARKET TRENDS IN BELGIUM
The Belgian real estate market has recovered to pre-pandemic
levels, with the number of transactions increasing by 17% in 2021,
according to Deloitte. Despite long-term uncertainty, industry leaders predict robust growth for
2022.
Residential Sector
The prices of residential properties rose by 7% in 2021, double
the growth of 2020.
These increasing prices and the high demand for housing are
pushing more properties into the country’s rental market. As
most of these dwellings are outdated, investors are responding by
developing build-to-rent projects to supply higher-quality
products.
Commercial Sector
Despite rising inflation, retail letting activity was high in the second
quarter of 2022. However, activity in the sector’s investment
market is subdued.
The most visible trend in the Belgian commercial sector is the increasing
number of large developments in the logistics industry. The need
for storage space is increasing due to e-commerce and the
country’s location in the heart of Europe. This trend is
forecast to continue in the coming years.
The industrial property segment has already recorded 2022 as its
best year for investment volumes. Backers poured ?747 million into semi-industrial and
logistics properties during the year’s second quarter. The
increased interest in Belgian logistical properties among
international occupiers has attracted more investors.
It’s clear that the commercial real estate market in Belgium
may begin to play a vital role in European logistics. Let’s
take a look at what’s involved in buying one of these
properties.
BUYING COMMERCIAL PROPERTY IN BELGIUM
Belgium doesn’t impose restrictions on foreign investors
buying or financing property. However, Belgian tax residency plays a role as
non-residents (for tax purposes) are subject to different tax
implications.
While Belgian property prices are lower than many of its
European neighbors, purchasers must consider the country’s high
transaction costs.
The Process
Once you’ve found a suitable commercial property, the
following steps typically take place:
- Send a formal, written offer to the seller. It’s customary
to negotiate before reaching a final price, which could be up to
15% lower than asking. - Both parties sign a contract of sale, after which you must
complete the purchase. You must pay 10% of the agreed selling price
into a trust, which you’ll lose if you cancel the
agreement. - Notaries representing buyer and seller draw up the relevant
deed transferring property ownership. - Once both parties sign the deed, you get the keys to your
property. - You must register the sale at the official office within four
months and pay the transfer tax.
It takes around 62 days to successfully transfer a property into
a new owner’s name in Belgium. It’s also important to note
that according to Belgian law, all contracts must be in French or
Dutch. You’ll have to hire an interpreter if your notary or
estate agent can’t assist you with translations.
The Fees
While the buyer and seller usually split the costs of the sale,
the purchaser pays most of the fees. Depending on your property,
charges could be as high as 21%.
These are the fees payable by the buyer when purchasing a commercial property in
Belgium:
- Registration/Transfer tax: The registration tax only applies to
properties older than two years and varies according to location. A
transfer fee of 12.5% of the purchase price applies to Brussels and
Wallonia, while 10% applies to Flanders. - VAT: Properties less than two years old are considered new and
qualify for VAT rather than transfer taxes. The buyer of a new
building pays a tax of 21% of the purchase price. - Notary fees: The state fixes the costs of notarial services
depending on the property. Expect to pay an average of 1.6% of your
purchase price. - Valuation fees: A survey of your property costs ?200 plus VAT.
These evaluations are usually compulsory when purchasing with a
mortgage.
A Note on Registration Tax Exemptions
Each of Belgium’s three main regions offers the following
reductions in registration taxes when buyers meet specific
criteria:
- Brussels: An exemption on the first ?175,000.
- Wallonia: An exemption on the first ?20,000.
- Flanders: A reduction of ?5,600 on registration fees if the
purchase price doesn’t exceed ?200,000. This limit rises to
?220,000 in some urban centers.
However, these exemptions, or abatements, are geared toward
helping families purchase homes. The property concerned must be
used for housing, automatically disqualifying commercial
buildings.
THE ANNUAL COSTS OF OWNING BELGIAN COMMERCIAL PROPERTY
Some Belgian taxes are charged at the regional level, while
individual municipalities levy their own additional charges.
Expect the following annual taxes when owning a Belgian
commercial property:
Property Tax (Immovable Withholding Tax)
Non-residents renting out their Belgian property pay tax if
their rental income exceeds ?2,500. Any amount under the limit
doesn’t need to be reported, provided it’s the owner’s
only income source in the country.
Officials calculate your annual property taxes based on your
real estate’s presumed annual rental (cadastral income). This
amount is the potential net rental income of your building for one
year, whether leased or not. The value is determined using rents
from 1975 and then indexed for the tax year, with maintenance and
repair costs deducted.
A 20-50% tax rate applies to the cadastral income. These levies
are usually lower than if calculated using actual collected
rent.
Municipal Taxes
Some municipalities charge additional annual levies at varying
rates. For tax residents, these range from 3-9%.
Non-residents receiving more than ?2,500 of income from
immovable property pay a fixed municipal rate of 7%.
SELLING COMMERCIAL PROPERTY IN BELGIUM
Once you sell your commercial property in Belgium, the taxes due
depend on the specific circumstances of the transaction.
Belgium typically doesn’t levy capital gains taxes on non-residents. However,
withholding taxes apply if the taxpayer realized the gain on
immovable property in Belgium. The authorities base taxation rates
on whether or not the transaction was within the “normal
management” of private assets.
“Normal management” isn’t clearly defined under
Belgian tax law. The benchmark is obviously being a person who
takes careful actions to grow and retain their personal wealth.
There are also a few guidelines on the concept:
- Assets are limited to real estate, financial investments,
stocks, and movable goods. - The owner acquired the assets through inheritance, gifts, or
personal savings (in a normal way).
Should your sale fall under “normal management” of
your estate within five years of acquisition, 16.5% withholding tax
applies. Adding local taxes raises the amount to approximately 18%.
A sale after this period would be tax-free.
Circumstances that could be considered “outside the scope
of normal management” of assets may include selling multiple
properties at once. In this case, the withholding tax rate
increases to 30.28%.
MAKE THE MOST OF BELGIUM’S COMMERCIAL BOOM
The demand for space in Belgium’s commercial market,
especially logistical properties, seems set to increase over the
foreseeable future. As land values and rents are likely to grow at
faster rates over the remainder of the year, investor outlook is
positive.
There’s no better time to grow your wealth through acquiring
Belgian commercial properties. An international wealth management
team can help you navigate the nuances of placing your capital in
offshore properties. You can learn more here.
Sources: Chambers and Partners, Ceusters, KBC Brussels, Expatica, Global Property Guide, Knight Frank, Anglo Info, Expat, Commissioner Brussels, Finances Belgium, Notaire, Notaire, Notaire, Notaire, Taxpatria, Finanzen Belgium, Finance Belgium
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
