Would-be property purchasers are generally well informed about the cost of the purchase. However, selling owners are often ignorant about information on taxes due upon resale. So let’s briefly return to the amount of taxation, how it’s calculated and the ideal time to sell to keep taxation under control.
Amount of taxation
In the ordinary situation of a property owned for more than 5 years (period calculated between dates of notarised deeds), no taxation is applicable on the capital gain. The rule is the same for land owned for more than 8 years. In the event of a resale of a property within a 5 year period, then capital gains tax will be applicable. The default taxation will be 16.5% (taxation as miscellaneous income), unless the transaction can be described as speculative, which is outside the scope of managing an asset with due diligence, in which case the tax will be 33%.
Determining the taxable capital gains
The tax base for capital gains tax is determined by the following parameters:
- purchase price
- flat rate for expenses (fixed at a flat rate of 25% of the purchase price) covering registration fees, notary fees and other costs borne by the buyer (for example, basic deed fees, brokerage fees, etc.)
- potential works (justifiable by an invoice from an licensed contractor)
- capital gain permissible per year of ownership (5% of the purchase price per year of ownership)
The tax base will be determined as follows:
Taxable base = selling price - purchase price - fixed price for expenses - works - capital gain permissible per year of ownership
A building containing 3 apartments located in Forest purchased on 01/05/2016 at a price of €359,000 for which work was carried out by an licensed contractor in the amount of €76,000. The building is sold by notarised deed on 15/03/2018 at a price of €565,000.
In 2019, the seller will be required to report the following capital gain in their personal income tax return on 2018 revenues:
Taxable base = €565,000 - €359,000 - (25% * €359,000) - €76,000 - (5% * €359,000)
This amount will be included in the return in the appropriate box, as miscellaneous income (16.5% tax) or speculative income (33%).
The capital gain tax will therefore be €3,680 in the first case, or €7,359 in the second case.
Recovery of registration fees
It should be noted, however, that in this type of operation, part of the registration fees may legitimately be recovered in the event that the property is resold within 2 years of its purchase (this refund must be officially requested (requête en restitution) by your notary to the authorities within a maximum of two years following the deed of sale).
The amount to be returned is different depending on the region where the property being sold is located:
- In Wallonia, this is 3/5ths of the registration fees.
- In Brussels, this is 36% of registration fees.
- The Flemish region has its own system for the transferability of fees.
So when should a sale be made?
As you can well imagine, if you want to sell your property within 5 years of its purchase, it is appropriate to anticipate the best time to sell in order to counterbalance the effect of capital gains tax through the refund of registration fees. The best time is between the first year of ownership and before the end of the second year. In this way, you can benefit from the partial refund of registration fees depending on your region and you can reduce your taxable base by including in the calculation a permissible capital gain of 5% of your property for its first year of ownership.