Three cases
There are three situations in which VAT is due on the letting of immovable goods:
- When the landlord and the tenant choose to charge VAT on the rent (the so-called optional VAT rent);
- Letting of storage space. This was already in place, but now there is a difference whether or not the tenant is a VAT payer; and
- Short-term rent of immovable goods.
The optional VAT rent
Under the optional VAT rent scheme, the landlord and the tenant together opt to charge VAT on the rent. In order to do so, they should include a pro fisco statement in the rental agreement. The advantage for the landlord is that the VAT which was paid becomes deductible.
Additionally, it is required that the tenant uses the immovable property for a VAT activity. The VAT on the rent is than also deductible for the tenant. Do note that the immovable property should be quite new, since the landlord cannot have paid VAT on the building before 1 October 2018. The tax authorities do have a flexible interpretation. VAT paid on demolition or architect services are not taken into consideration. When we say ‘for the first time after 1 October 2018’ we really mean VAT on the invoices from the contractor to the landlord.
The scheme only applies to passive letting of immovable goods (mere letting of the immovable property without additional services). This does not apply to terrains. When you rent out a building with a terrain, then the price for both can be subject to VAT, but the rent for a mere terrain can never be subject to VAT. On the other hand you can opt for VAT when letting only part of a building. This part should then be able to economically function independently. E.g. it will have to have a separate entrance.
If VAT for professional assets was deducted and afterwards the professional use of these assets is interrupted, you should make a so-called VAT revision. This means that you have to repay the deducted VAT for the remaining period. For a building you should make such revision when the change occurs within a fifteen-year period. This would also mean that in case your tenant leaves, you should make a revision for the time the building was unoccupied. But also for that case there is a solution: under certain circumstances you do not have to do a revision when during a certain time the building is not rented out. On the other hand, the revision period is not 15 years, but 25 years.
Letting of storage space
The letting of storage space was already subject to VAT, but now there is an important novelty. In case the storage space was rented to a VAT payer (a so-called B2B transaction) the landlord was obliged to rent with VAT as soon as the building was used for more than 90% as storage space.
As from 1 January 2019 you can apply VAT when the building is used for more than 50% as storage space. If there is a commercial part in the building (e.g. sales room), then this cannot be more than 10% of the building. In case the 50% not attained or is the 10% exceeded the rent is not automatically subject to VAT, but you can still choose for the optional VAT rent as explained above.
A B2C renting of storage space remains in all cases subject to VAT.
Short term renting
In the past when you rented buildings to VAT payers for a period of maximum 6 months, you could choose not to apply VAT. This is no longer possible: short term rent to VAT payers is now always subject to VAT. Do you rent to private individuals or non taxable not-for-profit organizations, nothing changes and no VAT is due after 1 January 2019.