Live in Luxembourg, own real estate in Belgium
On questions of tax, structuring, planning and more, Banque Degroof Petercam can help thanks to years of experience.
Many Luxembourg residents own property in Belgium. Whether it is a second home on the coast or a country house in the Ardennes, our westerly neighbour is a popular holiday destination for Luxembourgers. Many Belgians have chosen to settle in Luxembourg while maintaining a home in Belgium. “Such investments are financially interesting, but several considerations have to be taken into account when acquiring and holding a property on Belgian territory," explained Florence Waûters, Senior Estate Planner at Degroof Petercam Luxembourg. “In particular, taxation of real estate is handled differently in Belgium and Luxembourg regarding the acquisition, transference and holding of these assets.”
Registration and transfer taxes
At acquisition, registration duties are much higher in Belgium: 12.5% of the transaction amount in Wallonia and Brussels, and 10% in Flanders. "When inheriting a property, you also need to be aware of the tax implications. In Luxembourg there are no inheritance taxes applicable to someone in your ‘direct line’. In Belgium, the marginal tax rate in direct line can be as high as 27% or 30% depending on the region and the value of the property," explained Ms Waûters. “Gift tax may also be applicable, with a slightly more favourable rate than for inheritance.”
Taxation of property held
Simply owning a property in Belgium may also make you eligible for certain taxes, often to the surprise of many Luxembourg residents when they receive a request for information from the tax authorities.
"It is important to know that a property tax called précompte immobilier is due each year for every real estate asset. It is calculated on the value of the property as represented by its cadastral income," said Ms Waûters. Other taxes and obligations may also apply. "For example, some are required to file a non-resident tax declaration for natural persons if they receive rent in excess of 2,500 euros on their property in Belgium. This might also apply if they receive other income from Belgian sources, such as retirement pensions or professional income, even though they do not receive any rental income. They will then be taxed, not on the amounts of the actual rents received, but on the basis of the total cadastral income of their property in Belgium," she explained. “However, if the property is rented out for professional uses, then the actual rent paid will be taxed. It is to find out how property is being used in Belgium that the tax authorities have been sending out regular requests for information in recent months.”
Before buying, ask the right questions
It might be worthwhile holding or purchasing your real estate assets through a company under Belgian or Luxembourg law. “This depends on each individual’s circumstances and how they intend to use the property, taking into account different advantages and disadvantages of each approach," Ms Waûters added. “Being wealth planning professionals, we are there to advise clients and enable them to consider the most favourable options, based on our in-depth knowledge of how law and tax is applied in Belgium.
It is always worth asking searching questions before acquiring property, especially when considering how to meet probable future needs and the various financing options. “For example, it may be advantageous to borrow so that interest can be deducted from the property income," said Ms Waûters. “If the aim is to optimise how ownership is transferred, other options can be considered such as the acquisition of the property in parts. The challenge is always to find the best solution that meets each individual Luxembourg-resident’s objectives when buying a property in Belgium, taking account of differing realities situation and the value of the asset.”
Questions about a second home in Belgium? Contact Florence Waûters, Senior Estate Planner: f.wauters@degroofpetercam.lu
