1 July 2022

Transfer of real estate without real estate transfer tax: ruling commission accepts quick conversion into a partnership

The transfer of real estate from a company is usually accompanied by a high tax burden due to the 12% sales tax. However, partnerships have exceptions. The ruling commission had to decide on a case in which a capital company wanted to transform itself into a partnership in order to subsequently release a property with the application of a more favourable regime.

The real estate transfer tax in case of a release from a company (and exceptions)

When a company purchases a real estate property, the 12% real estate transfer tax is due. If the company later decides to transfer this real estate property, the real estate transfer tax  (1% / 3% / 12%) will in principle once again apply.  

However, there are some exceptions to this for partnerships, such as the limited liability company. One exception applies to the “historical partners”. The consequence of the exception is that the taxation in this case takes place with due regard to the common law character of the acquisition. This can be the real estate transfer tax (1% / 3% / 12%), the distribution right (1% / 2.5%) or the general fixed right (50 EUR). VLABEL accepts, for example, that a capital decrease in favour of the historical partners gives rise to a general fixed right of 50 EUR. 

Two conditions must be fulfilled for this: (i) the company must have acquired the real estate with payment of the real estate transfer tax and (ii) the acquiring partner must be able to prove that he was actually a partner at the time when the company acquired the real estate with payment of the real estate transfer tax.  

Conversion into a partnership

In the past, the question was regularly raised whether it is possible to convert a public limited liability company (capital company) into a limited liability company and then proceed to transfer the real estate property, with application of the exception regime, to one of its historical partners. However, the tax authorities can attack such legal acts on the basis of two figures. 

Firstly, the tax authorities can invoke simulation. Simulation exists when the parties do not accept all the consequences of their legal acts and when it can be deduced that these do not correspond to the real will of the parties. 

In addition, the tax authorities can also rely on the anti-abuse provision. As a result, all legal acts, which together form one transaction, will not be opposable to the tax authorities if a tax benefit is claimed not according to the tax objective of the law. Consequently, the taxpayer will have to demonstrate that his choice for the conversion is also based on non-fiscal motives in order to escape the anti-abuse provision, otherwise the sales tax will be due. 

Ruling on the Brussels regime 

The ruling commission recently discussed this problem, which however concerned legislation of the Brussels Capital Region. A married couple and a public limited liability company, of which they were the only partners, proceeded to purchase several real estate properties in undivided ownership. Pursuant to the new Companies and Associations Code, the public limited liability company amended its articles of association and transformed itself into a limited liability company.  

Subsequently, the partners decided to withdraw from undivided ownership of some of these acquired properties. They wished to hear from the ruling commission that these legal transactions did not constitute a tax abuse because, in their opinion, the exception of the “historical partners” applied.

The ruling commission stated that there was no tax abuse in the conversion of the public limited liability company to a limited liability company as this conversion was done mainly for company law reasons, rather than tax reasons. 


The relevance of the ruling is not limited to cases concerning the Brussels regime on stepping out of undivided ownership. The reasoning behind it can also be applied in other cases in which a transfer is about to take place, for example also in the Flemish Region, as a result of which for example the general fixed law can be applied. However, it is always required that the conversion is primarily based on company law reasons and not on tax reasons.

Eline Depaepe and Evert Moonen
De Langhe Attorneys

Published in Voka, Oost-Vlaanderen, editie juni 2022.

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