Will private rental income in Belgium be taxed differently in the future?

Ulrike Beuselinck Ulrike Beuselinck
Case

The European Court of Justice ordered Belgium to pay a fine of €2 million and a daily penalty payment of €7,500 for its taxation rules of rental income. Belgium will therefore have to find a solution as a matter of urgency.

The European Court of Justice does not accept that the rental income in Belgium is taxed on the basis of hypothetical rental income (kadastraal inkomen/revenu cadastral (KI/CI)) while rental income located outside of Belgium is taxed on the basis of the actual rental income.

Investment in real estate in Belgium is thus treated more favourably than investment in real estate abroad. According to the European Court of Justice, this is an inequality that must disappear.

After all, in general, the KI/CI corresponds to a fictitious rental income which, in practice, is lower than the actual rental income.

The Court of Justice does not rule on how the inequality must be ended, but only on the fact that it should be done. Belgium will therefore have to find a solution as a matter of urgency.

However, choosing to levy taxes on the basis of actual rental income will increase the tax burden for the owner-investor of real estate.

Consequently, many investors may consider the investment in real estate in Belgium as not rewarding enough and/or may pass this taxation on in the rent. In both cases, this will have major consequences for the global rental market.

Minister of Finance Van Peteghem has already indicated that he has instructed his administration to work out a solution.

Beware! This only relates to renting real estate by private owners to private individuals. Renting by professional landlords or investors or to professional tenants is already taxed on the basis of actual rental income.

We look forward to the result and hope it will not be disruptive for the Belgian private rental market.

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Koen De Puydt

Koen De Puydt

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Ulrike Beuselinck

Ulrike Beuselinck

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