Belgian construction and real estate sectors are urgently calling for a reduction in Value Added Tax (VAT) on new construction and the purchase of primary residences, citing a worsening housing crisis and mounting pressure on the rental market. The appeal, made public over the weekend, comes as the federal government prepares to revisit a previously rejected VAT reform proposal.
According to Embuild, Bouwunie, the UPSI, and the CIB, a targeted VAT reduction is crucial to making new construction accessible again and easing the strain on rental availability. Currently, over half the purchase price of a new home in Belgium goes to public authorities through VAT, registration fees, and other taxes. For a €350,000 property, VAT alone amounts to nearly €59,000, rendering homeownership unattainable for many families.
The organizations argue that this financial burden is driving potential buyers towards the rental market, where competition is fierce. Recent figures indicate as many as 60-70 candidates are vying for each rental property, exacerbating the pressure on housing rights, particularly for vulnerable families.
The call for a VAT reduction coincides with the government’s renewed consideration of a broader VAT reform. A previous attempt was rejected by the Council of State. The current governing coalition, led by the N-VA party, is now pushing for a revised plan that includes lowering the VAT on new construction to 6% or 9%, a proposal initially put forward previously. N-VA President Valerie Van Peel stated that the reform would “grant oxygen to the construction sector and young families.”
The N-VA proposal centers on increasing the standard VAT rate from 21% to 22% and harmonizing the existing 6% and 12% rates into a single 9% rate. Van Peel argues this would reduce the tax burden on labor. The government likewise intends to craft permanent the reduced 6% VAT rate for demolition and reconstruction projects, expanding its scope to include deliveries within renovation projects, though with a reinforced surface area criterion of 175 square meters.
However, the proposal faces resistance from within the coalition. The MR party has, as of Wednesday afternoon, maintained its opposition to any increase in VAT rates. The socialist party Vooruit also expressed concerns, stating they are against a VAT increase and would prefer a direct increase to 22% if budgetary adjustments are necessary, rather than raising prices on essential goods.
The debate over VAT reform highlights the complex political landscape surrounding housing policy in Belgium. The government is grappling with the challenge of balancing budgetary concerns, coalition agreements, and the urgent necessitate to address the growing housing crisis. The next steps remain unclear, with no immediate timeline established for a decision on the proposed VAT changes.
