Buying real estate through a company: what are the advantages?

Buying property through a company offers a number of advantages over buying as an individual. Not only are the costs deductible, but the transfer or sale of your property is also considerably easier. On the other hand, removing the property from the scope of your company, or even liquidating it up, will be less pleasant. BuyerSide takes stock of the situation.

1. When you buy, you deduct registration fees

When you buy a property on the secondary market in Belgium as an individual (except in special cases such as the first-time buyer allowance), you are required to pay solid registration fees at the time of notarization: 12.5% of the purchase price in Brussels and Wallonia, 12% in Flanders. When the property is new, these registration fees are due on the plot portion, and VAT (21%) is charged on top of the purchase price.

With a company: If you buy the property through a company, the same registration fees and VAT will be due and will have to be paid by the company. However, as these are considered costs, they will be deductible from your company's taxable base, and will therefore ultimately boost your net profits.

NB: Please note that if you wish to incorporate a property you already own as an individual into your company, registration fees will once again be due (unless it is a commercial property). This option is therefore not to be preferred.

2. At tax time, you can deduct all costs and amortize your investment

As a reminder, the taxation of a property (home) owned by an individual is calculated on the basis of the cadastral income in Belgium. This cadastral income (CI), allocated to each property and indexed each year (CIi), is used:

on the one hand, to calculate the amount of withholding tax on real estate
secondly, it is added, plus 40% if you rent it out to individuals who do not carry out any professional activity (or if you do not rent out the property), to your income subject to personal income tax, at the marginal rate.

Provided you are taxed on other income at the personal income tax, this surplus will very quickly find itself in the highest tax bracket (over 50%).

You can, however, deduct the interest on your mortgage(s) taken out for your property purchase(s) to neutralize this extra tax.

If the property is rented to a legal entity or is used for commercial purposes, the rents are taxed on a “real” basis, from which you can deduct a flat-rate expense allowance of up to 40%.

In the case of a company, rents received are taxed on a “real” basis at the corporate tax rate (i.e. 25% or 20% under certain conditions), diminished by:

maintenance costs
depreciation of the investment and renovation (and any improvements such as those aimed at improving the building's energy efficiency) (excluding land value) (e.g. over 30 years)
notary and registration fees (see above)
costs of mortgages and other building-related loans
property withholding tax
other expenses specific to any company, including car or restaurant expenses, for example (linked to the business).

In other words, the more you invest in your property, and the more it increases in value, the less tax you pay.

3. There are a number of options available to you as a company for collecting your rental income

Unlike rent from a property owned by an individual, which you can freely dispose of, the non-invested income that falls into your company will have to be:

distributed to you in the form of dividends (subject to withholding tax of 30% or 15% for companies incorporated on or after July 1, 2013)
be reduced through a capital reduction (without withholding tax, unless the company has reserves)
return to you in the form of a loan to a shareholder. In this case, it's best to allow for (adequate) interest to avoid being taxed as a benefit in kind.
give rise to executive remuneration or directors' fees (taxed at personal income tax).

4. To resell your company property(ies), you can:

sell the shares of the company (in this case, the capital gain is not taxable for the individual selling the shares)
sell a propertyheld by the company, in which case the capital gain will be subject to corporation tax
liquidate the company, but the withholding tax on liquidation bonuses (30% or 15%) does not make this option very attractive.

5. It's easy to give away company-owned property

To donate company-owned real estate, all you have to do is sell the shares. As this is a gift of movable property (and not of real estate, which is subject to progressive rates of registration duty - up to 50%), it does not necessarily give rise to registration duty.

However, if the donor does not survive the gift by 5 years, the amount of the transaction will be subject to inheritance tax... unless he or she has registered the gift of movable property at the rate of 3%, or has taken out a special life insurance policy.

It is also possible to set up a family foundation, which offers numerous advantages.

How much does a property company cost?

All companies are subject to certain obligations, which entail costs, particularly accounting costs (expect to pay 800 euros per quarter). The more properties the company owns, the more these costs can be diluted. There are also incorporation costs (+- 1,200 euros for a limited liability company).

The advantages of a management company: https://www.law-right.com/fr/avantages-dune-societe-de-management/