The recent tax increases for NPOs, foundations, long lease and building structures explained

By the end of 2024, a law was adopted reforming the patrimony tax. In addition, the rate for registering the grant or transfer of a building or long lease right was also increased.

Reform of the patrimony tax

Until December 31, 2023, the rate of the patrimony tax amounted 0,17%. Subject to a few legal exceptions, this rate was applied to all the assets of (international) NPOs and foundations. Only when the value of the assets was below 25 000 EUR, this tax was waived.

Although the Flemish inheritance tax (partially) decreased most recently in 2018 and the rates applicable before that were already in application since the 90s, an increase in the flat rate of 0,17% of the patrimony tax was, strangely enough, according to the legislator, in order since a higher patrimony tax “is more in line with the evolution of the rights that the tax intends to compensate.”

Henceforth, the patrimony tax is set by the following progressive tranches:

• < 50 000 EUR: 0%;
• 50 000,01 EUR – 250 000 EUR: 0,15%;
• 250 000,01 EUR – 500 000 EUR: 0,30%; and
• > 500 000 EUR: 0,45%.

If the assets have a value of less than 50 000 EUR, they will not be subject to the patrimony tax and are exempt from the reporting obligation. An important difference involves a basic exemption in the first tranche, which means that this part is always exempt. In contrast, under the former regime, assets were fully subject to the 0,17% rate as soon as their value exceeded 25 000 EUR. Thus, there is not a tax increase in every circumstance.

Since a heavier tax burden will from now on affect entities with larger assets, a new partial exemption is provided for certain categories fulfilling a number of criteria. These are only liable to the patrimony tax in the amount of 37,7% of the value of their assets.

New tariffication of registration duties for a right of long lease or building

Until recently, a registration duty of 2% was, in principle, payable for contracts granting or transferring a long lease or building right. Since January 1, 2024, a leaseholder or a holder of a building right has been subject to a registration duty of 5% on the total amount of remunerations paid by them. This increase was implemented “for the purpose of financing expenses in the general interest.”

A building or long lease right is often used in new construction projects. In this process, a right of building is granted by the land owner to a property developer, with registration duties being due in principle. This technique leads to a division of the land and the building constructed by the property developer. In a subsequent sale, only 21% VAT will be levied on the value of the building and (much lower) registration duties on the value of the land, thus the buyer escapes the 21% VAT rate on the land share.

Finally, when buying in full ownership of the sole owner-occupied home, a buyer can still benefit from a real estate transfer tax of 3%. In the case of a major energy renovation or a demolition and reconstruction, this rate is even 1%. Thus, in certain situations, a purchase in full ownership is strangely more tax-friendly than granting a long lease or building right, even though the latter figures do not encompass “full” ownership.

Conclusion

Traditionally, a new year is accompanied by the entry into force of new tax measures. This was no different at the end of 2023. This time, one of the targets were indirect taxes to provide the Belgian State with additional funds. Entities subject to the patrimony tax would do well to take this into account quickly, considering the deadline for filing the tax return expires on March 31, 2024.

Mathias De Schrijver and Evert Moonen
De Langhe Attorneys