Buying a home is a monumental occasion for anyone, but this helpful guide will help you with all aspects of purchasing a property in Belgium.
While buying a home in Belgium is an exciting life decision, it is also an expensive one. Most people can’t afford to purchase a home outright and need assistance from a bank. Once you clear that hurdle, you then have to deal with the many fiscal implications that come with making a large financial decision.
Lien Verdoodt, an estate planner at BNP Paribas Fortis, outlines the financial and tax realities and challenges of being the proud owner of that dream home in Belgium. Her mission is to assist private banking clients with the legal and tax structure of their movable and immovable assets.
BNP Paribas Fortis
With dedicated expat branches and an Expat Team, BNP Paribas Fortis is the trusted banking partner of internationals in Belgium. You can open an account, get your rental guarantee and set up your insurances remotely, before you even arrive in the country, and get expert advice and guidance on settling in Belgium. The best part? BNP Paribas Fortis’ Dedicated Premium Offer is free for expats.
Buying a house in Belgium
Buying a house in Belgium is a popular move due to the country’s reasonable property prices, good quality accommodation, and overall high living standards. There are no restrictions on foreigners buying and owning property in Belgium, so whether you have relocated for work purposes, are an entrepreneur wanting to live in one of the business hubs of Europe, or are just looking for a good price second home, buying a property here can be a good investment.
To purchase Belgian property, Lien explains that buyers must make a written agreement; this is known as the purchase agreement or purchase contract (compromis de vente/ verkoopcompromis). This is the sale agreement between the buyer and seller; the real estate agent or notary normally sorts this out. The moment this agreement is signed, the property is considered sold even though money has not changed hands.
“This first agreement is necessary to get a loan at a bank,” Lien explains. “In two to four months, that agreement will be confirmed and notarized; this officially registers the house in Belgium for all mortgages and taxes.”
Purchase agreements are normally written in French or Dutch. It is important, however, for signatories to completely understand the full details of the contract. For sales involving expats, this often means hiring translation services to translate the document into their native language. Buyers are responsible for bearing the costs of this; as well as those associated with translating their personal documents into Dutch or French.
The overall costs of the property purchase will include these fees. This is usually as part of the legal bill issued by solicitors. The various costs associated with buying a Belgian home – such as taxes, agency fees, notary fees, deed of sale, and admin costs – typically amount to around 11 to 15% of the purchase price for the buyer. This is slightly more for properties that are less than two years old as this includes VAT. It is crucial to budget for these costs when looking for property to avoid any nasty shocks later on.
See this guide to buying a property in Belgium for more information on the costs and general buying process.
Securing a mortgage in Belgium
Many homeowners in Belgium will need to take out a mortgage to cover the costs of buying their home. Once they have drawn up their purchase agreement as a buyer, they can take out a Belgian mortgage. As with buying property, there are no restrictions on foreigners getting a mortgage. There are, however, usually more stringent conditions and higher deposit requirements for those who don’t live and work in Belgium. Banks normally ask for about 20% of the property price as a deposit and will offer mortgages with repayments of up to 35% of monthly income.
Belgian banks offer different types of mortgages including fixed-rate mortgages, variable-rate mortgages, combined rate mortgages, and repayment-only mortgages. For more information about Belgian mortgages, such as establishing good credit and how loans are approved, see this guide to mortgages in Belgium or arrange to speak to a lending officer at BNP Paribas Fortis.
Belgian property taxes and rates
There are various different taxes associated with buying a house in Belgium, with rates varying immensely based on factors such as the value of the property and which region it is located in (Wallonia, Brussels, or Flanders). The main tax associated with the sale is the registration tax; this is paid on the transfer of the deeds from seller to buyer.
In Flanders, the registration tax was reduced from 10% to 7% in 2018 for homes that are your only family residence. This is reduced further to 6% if you agree to carry out energy-efficient renovations. For second homes, holiday homes, and so on, the rate is still 10%. In both Brussels and Wallonia, the registration tax is 12.5%. However, there is a lower rate available of 6% in Wallonia if the home fits the definition of a modest residence.
Tax-free allowance on registration tax
There is a tax-free allowance on the registration tax – called the abattement – in Flanders and Brussels. The exact amount varies depending on factors such as property value. In Brussels, the first €175,000 of the selling price is exempt from registration tax on properties valued up to €500,000. In Flanders, there is an abattement of €15,000 if the home is the buyer’s main residence. You can check with a tax adviser in your region to see what tax-free allowance you might qualify for when paying registration tax. The Value Added Tax (VAT) is also payable at the point of sale, at 21%. The buyer needs to pay this on new properties which are less than two years old.
When you live in Belgium, you will also have to pay an annual property tax on your Belgian home. The current rate of this tax as of 2019 is 2.5% in Flanders, 2.25% in Brussels, and 1.25% in Wallonia. Other ongoing property-related taxes include municipal taxes for property-related services (e.g. rubbish collection) and any taxable income generated by your Belgian property, which has to be declared in your annual income tax return.
Filing your Belgian taxes as a homeowner
This is a lot to take in, especially if you are not too familiar with Belgian tax law. As Lien Verdoodt explains, many people feel overwhelmed.
“From the moment you have more than professional income, such as a home, it gets difficult to file taxes for yourself,” she says. “Then, if you add in elements that might offer tax breaks, such as a mortgage loan, you really need help to file taxes in Belgium.” She breaks down the various elements, starting with the progressive tax tariff, explaining that “the more income you have, the more you pay in taxes; the maximum is fixed at 50%. Whether the income is from property or a professional salary, it’s all taxed together.
“The use of the property determines the tax you pay,” she explains. “If you have a second residence on the coast, you will pay a different amount of tax than if you use it professionally or as your main residence. It’s all very specific. You need someone to help you, as the rules can be very difficult.”
And she would know. “I had to go to school for two years in Brussels to understand all this”, she explains. “I specialize in the Flanders region. My colleagues and I each have our own regions in order to know the rules and peculiarities a little better; such as with the annual advanced levy. For example, if you have at least two children for whom you receive a children’s allowance, you receive a reduction. If you have a handicap, you receive a reduction. But these reduction amounts change per region and even per year.”
Income tax return
As for the income tax return, Lien says, “This is your annual personal tax return and within this you would need to mention taxable immovable income. This means a house plus all your immovable property (except your main residence); all professional income; and income from movable property (savings), plus various income elements, such as the concession on the right to install mobile devices. This is also where you would put your reductions. “But the reductions are on various pages of the tax form — to make it easy!” she jokes.
Those living in a property on which they have a mortgage will have a deduction budget consisting of interest, capital repayments, and life insurance premiums. The region you live in determines the maximum amount deducted each year.
See this guide to calculating your Belgian tax burden for more information.
Selling your property in Belgium
“As for selling your home,” Lien continues, “you don’t have to pay any back taxes; all reductions received stay and there are no new calculations. If you sell the family home or a house more than five years after you purchased it, you don’t have to pay any taxes; it doesn’t matter how much profit you make. However, if you sell a house that is not the family home within five years of buying it, you will pay 16.5% capital gains tax on the adapted added value. This is the difference between the price you paid and the price you sold taking into account certain costs and inflation.”
Whether you are eyeing your dream home, buying a home on the coast, or getting your financial affairs in order, contact your local BNP Paribas Fortis office. Experts such as Lien are on hand to untangle the technical jargon and simplify and explain the specific tax laws related to your situations. They can assist you in making the right financial decisions when purchasing property in Belgium.