27 January 2023

Cassation gives the tax authorities ammunition regarding the 6% issue on renovations

Certain works in immovable property, such as renovations, can be invoiced at a reduced VAT rate of 6% instead of the general VAT rate of 21% for new or thoroughly renovated constructions. On several occasions in the past, discussions have flared up concerning the boundary between a new construction and a renovation. Recently, the Court of Cassation ruled unambiguously on this distinction. This time, the Court applied a stricter interpretation.

Reduced VAT rate of 6% on renovations

Works in immovable property can – under certain conditions – benefit from a 6% VAT rate if they involve acts of transformation, renovation, rehabilitation, improvement, repair or maintenance (cleaning excluded), fully or partially, of a property. On the other hand, new or thoroughly renovated constructions are subject to a VAT rate of 21%.

In the absence of any description by the legislator of what should be covered by “transformation” or “renovation”, casuistry shows that there has been disagreement for some time between the taxpayer and the tax authorities on the actual interpretation in this regard.

In the past, the tax authorities have explained their position on the distinction between a renovation and a new construction in an administrative notice and an administrative decision. Thereby the following three criteria emerged, that should be cumulatively present to qualify as a renovation:

  • the renovation works must be supported in a relevant way by old load-bearing walls (in particular the external walls) and, more generally, by the essential elements of the structure of the to-be renovated building;
  • the area of the old section exceeds half of the total area of the dwelling or housing complex after the execution of the works; and
  • the new section cannot function independently from the old section but complements the old section and therefore constitutes as a whole in terms of use of the building.

However, the jurisprudence has repeatedly stressed that the aforementioned criteria are only guidelines for the tax authorities. After all, such administrative guidelines have no legal force.

Court of Cassation applies a strict interpretation

Late 2022, the Court of Cassation gave a strict interpretation to the distinction between a conversion and a new construction, although it seems to have taken its inspiration from the aforementioned administrative directives. First, the Court stated that a new construction exists if the works carried out do not rely on the essential elements of the construction’s structure. Furthermore, the Court of Cassation considers that there is also a new construction if the essential elements of the construction’s structure, and in particular the foundation, are substantially renewed or reinforced to support the works carried out.

As a result of this stricter interpretation, it could be more difficult, depending on the case, to benefit from the 6% VAT rate. Whereas in the past jurisprudence accepted that a renovation on an old barn could benefit from the reduced VAT rate, even though this renovation was based on old walls and reinforced foundations, we deduce from the Court of Cassation’s opinion that this is no longer accepted for the renovation of an old farmstead if the foundations and outer walls were reinforced in order to continue fulfilling their bearing function.


The classification as renovation or new construction remains a factual matter and will always have to be assessed according to the specific case. In the light of the Court of Cassation’s strict vision, the tax authorities have new ammunition to refuse the 6% VAT rate more quickly, which may lead to an array of new discussions.

Mathias De Schrijver and Evert Moonen
De Langhe Attorneys

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