Transfer of real estate in liquidations: extended application of the general fixed right possible?
The transfer of real estate from a company is in principle subject to the real estate transfer tax (12%). A well-known exception is the ‘waiting regime’, where only the general fixed right (50 EUR) is levied. In recent years, however, VLABEL has not failed to spout fog around the interpretation of this exception. Off and on, it increased legal tax uncertainty on the basis of decisions with little solid legal foundation. Recently, VLABEL did offer some more perspective to taxpayers.
Principle
The transfer of real estate is in principle subject to the 12% real estate transfer tax. However, there are some exceptions to the principle levying of the real estate transfer tax for partnerships (BV, CV, VOF, CommV) such as the “waiting regulation”. Under this scheme, if a property held by a partnership is distributed to the partners in proportion to their shareholding, only the general fixed right of 50 EUR is due. Only when the undivided property is terminated or when a partner transfers his share in the property to one or more partners the real estate transfer tax is due. If one can remain in undivided ownership, the waiting regulation is thus a fiscally advantageous route.
The VLABEL-position
Pursuant to the (new) Companies and Associations Code (hereinafter: CAC), the capital concept was abolished for partnerships. Subsequently, the notion of “capital” was also abolished in the legal provision from the Flemish Tax Code (hereinafter: FTC) regarding the waiting regulation. The term “capital reduction” was changed in the legal provision to “partial liquidations”, as a result of which the waiting regulation now applies to both a complete liquidation (the liquidation of the company) and a partial liquidation (e.g. the distribution of real estate). Subsequently, VLABEL also took a position on this:
- if the waiting regulation applies and the distribution of a real estate is charged to the contribution, the general fixed right will apply. Indeed, this is equated with the previous capital reduction in natura, where only the general fixed right was levied; and
- if the waiting regulation does not apply and the distribution is also charged to the available reserves, there will be a dividend distribution in natura as regards the charging to the available reserves. This is subject to the real estate transfer tax (or, in the case of an undivided estate, the distribution tax).
When considering the previous position, the question may be raised whether a transfer of real estate as a result of a total or partial liquidation, which was charged to both the contribution and the available reserves and where the other conditions of the application of the waiting regulation were met, would be valued exclusively at the general fixed right.
VLABEL brings clarity in a ruling
Afterwards, VLABEL was asked about the application of this ‘wider’ interpretation. A limited liability company with two shareholders wished to either only proceed with a distribution of the superficies, which would be charged to both the contribution and the available reserves. Or the limited liability company would be fully liquidated.
VLABEL states that in the event of a complete liquidation (read: liquidation) of the limited liability company, the general fixed right applies. The fact that reserves are also distributed does not prevent one of being subject to the waiting regulation. With regard to the partial liquidation (read: capital reduction), VLABEL states that a distinction must be made: i) depending on whether the distribution is charged on the contribution, then the general fixed right will apply, and ii) depending on whether the distribution is charged on the available reserves, this will be subject to the real estate transfer tax.
Analysis/conclusion
The relevant article in the FTC states that both total and partial liquidations can be covered by the application of the waiting regulation. Consequently, only the general fixed right should be payable on both liquidations. However, VLABEL does decide to treat them differently. After all, only the general fixed right will be levied on the entire liquidation, as opposed to what is the case for partial liquidations. The final word on this has not yet been said.
Eline Depaepe and Evert Moonen
De Langhe Attorneys