Bringing real estate into or out of the partnership: what about registration fees?

Acquiring real estate within a partnership offers many opportunities, but also brings with it important tax concerns. Both when real estate is contributed to a partnership and when it is distributed from a partnership, registration fees may be due.

The applicable rates and any exceptions depend on several factors, such as the nature of the property, who contributes or acquires it, and how the transaction is done.

Because the tax consequences in terms of registration law can sometimes be significant, it is important to have a good understanding of the ground rules beforehand. Below we highlight the main principles and exceptions toe regarding the contribution of real estate into a partnership in the Flemish Region.

 

 

Contribution of real estate to a corporation

What?

A contribution of real estate to a partnership is distinguished from a sale of real estate to a partnership by the consideration delivered:

• At a input does the contributor receive in exchange for this property shares of the company;
• At a sale, the seller gets a consideration that does not consist of shares.

If a sale occurs in which a company acts as buyer, the right of sale of 12% apply. This applies to the entire transaction and to all buyers, regardless of whether natural persons purchase with it. Also read: Selling or dividing property after a relationship breakup: what about registration fees?

 

 

Principle: 12% sales law

A contribution of real estate to a partnership by a natural person is in principle a transfer for consideration, on which the sales right of 12% owed.

 

Exceptions?

However, a contribution of property is not subject to the proportionate right of sale, but to the general fixed duty (50 euros) taxed, if:

• This input is fully remunerated with shares in the company; and
• The property contributed is not intended or used for residential purposes.

If, in addition to the issuance of shares, the contributor also receives a payment in cash or any other consideration other than shares, that transaction qualifies as a sale. The right of sale shall be payable in such case, but only on the portion of the consideration consisting of such sum of money or other non-equity consideration.

Also, when a universality of goods is brought in, such as in the context of a merger or split, only the fixed fee of 50 euros is due, provided that:

• The contributing company located is in the European Union; and
• The input exclusively reimbursed is provided by the issuance of shares, with the exception of a limited monetization of 10%.

 

Contribution of residential property by a natural person

When an individual contributes real estate that is wholly or partly intended or used for residential purposes is, the right of sale of 12% owed. This is an important consideration in practice: those who contribute their homes to a partnership pay the full sales charge.

Also, when a property both for residential and professional purposes is utilized, the right of sale will apply to the whole, unless the occupational portion can be secluded of the residential portion. In this case, the notarial deed will include a breakdown of the value.

 

Transfer of property from a partnership

Principle: 12% sales law

In the Flemish Region, when a company distributes property to its shareholder(s), in principle the sales right of 12% payable. The registration fees are borne by the transferee (the shareholder). This applies regardless of the method of contribution (dividend distribution in kind, capital reduction, dissolution, etc.).

 

 

Exceptions

For the partnerships (BV, VOF, Comm.V. and CV) two exceptions exist.

1. The historical partnership arrangement

This rule applies when the property is acquired by the partner:

• Who owns the real estate brought in himself at the time; or
• Who was already a partner at the time the company acquired the property upon payment of the right to sell.

In this situation, the distribution will be taxed according to the common law nature of the acquisition. If the shareholder is already co-owner of the property, this acquisition will be taxed as a distribution, to 2.5% distribution right. This rate is applied:

• On the obtained part if the undivided property does not cease to exist;
• On the total value If the undivided property ceases to exist.

 

2. The waiting regulation or waiting regulation-bis

This regulation applies to liquidation/dissolution or partial distribution of assets, provided:

• It involves a multi-headed company;
• The real estate pro rata and according to each person's ownership share is allocated to all partners;
• As part of a liquidation in accordance with the WVV or, during the company's existence, through distribution of assets; and
• Without consideration;
• In the case of the waiting arrangement-bis, the conveyance of the property must additionally be made through charging to the available or unavailable contribution (read: not on reserves).

This transaction is recorded to the general fixed fee of 50 euros.

In a subsequent distribution between shareholders, if the acquiring shareholder qualifies as a historical partner, the divisive duty (2.5%) apply. If none of the shareholders take over the property, but sell it to a third party, that third party will pay 12% sales duty, and the partners themselves will not otherwise owe any additional registration duty.

Does the acquiring shareholder qualify not as a historical associate, then it will standard rate of 12% levied.

Specifically, therefore, tax can only be charged based on the common law nature of the transaction if:

1. The shareholder qualifies as a historical partner; or

2. After application of the waiting arrangement(bis) the property is allocated to a historical partner.

Does the release not fall under one of the aforementioned exceptions? Then the rate of 12% sales duty will apply.

 

Limited liability companies: no exceptions

For the NV the above exceptions apply not. The sales right of 12% is at the NV always due upon distribution of property, regardless of how the property was acquired or the capacity of the shareholder.

 

Conclusion

The buying and selling of real estate in a partnership is fiscally a complex story, where small differences can have major consequences. The applicable registration fee depends on several elements, such as the type of property, the capacity of the parties involved and the structure of the transaction.

A proper preparation and correct fiscal analysis are therefore essential.