Current schemes until the end of 2023
Two schemes apply until the end of 2023, depending on the location of the construction site. After a review in October, one permanent scheme will be in force nationwide from New Year, with tightened conditions.
Tax benefit ‘Demolition and Reconstruction’: everything you need to know
For those building a home after demolishing an existing building, there is the opportunity to benefit from a reduced VAT rate of 6%, as opposed to the standard rate of 21% for new construction. A significant difference, up to €37,500 on a construction cost of €250,000. However, this tax advantage does not come without conditions. Here is a brief overview.
Current schemes until the end of 2023
Two schemes apply until the end of 2023, depending on the location of the construction site. After a review in October, one permanent scheme will be in force nationwide from New Year, with tightened conditions.
Invoices until 31 December 2023
For payments and invoices until the end of 2023, the old scheme will apply, regardless of the payment date in 2024. This applies to 32 cities with specific VAT reductions and the whole country with temporary arrangements.
From 2024: Uniform scheme with strict conditions
From 2024, these two schemes will be replaced by a single unified scheme, also valid in all 32 cities in which separate schemes currently apply. Some key conditions include:
Private builder: Only contracts between private builder and contractor are eligible for the reduced VAT rate
Own home: The property must be the sole and own home, with a habitable area of up to 200 square metres.
Ownership conditions: The builder must not own any other dwelling at the time of occupation, except the old family home.
At least five years: The conditions must be met for at least five years, and in case of violation, part of the tax benefit must be repaid.
Transitional regime in 2024 for construction promoters
For projects with planning permission before 1 July 2023, there is a transitional arrangement until the end of 2024. Buyers can still benefit from the reduced VAT rate until the end of 2024, but after 2025 this will no longer be possible.
Note: Breyne Act
Construction promoters are subject to the Breyne Act, which stipulates that invoicing is limited to the value of works carried out. This must be taken into account when invoicing in 2024.
This brief overview provides insight into the essential points of the tax benefit for demolition and reconstruction. It is advisable to seek professional advice for specific situations and projects.
In doubt about a project? If so, please do not hesitate to contact us, we are happy to advise you!
