When you purchase an existing home together with your partner in Flanders, you pay a standard 12% registration fee (sales tax) on the purchase price at the time of purchase. Regardless of whether you are actually/legally cohabiting or married, if you individually meet the conditions, you can enjoy the reduced rate of 2%, with respect to your share.
At that time, there is usually little concern about the possibility of the property changing hands again later due to a relationship breakdown. However, when a relationship breaks down after the purchase, the applicable registration fees can have a significant financial impact. Especially when the breakup occurs shortly after the purchase.
To alleviate that financial hangover, the legislature provides a number of specific regulations, including in the case of a quick resale and in the case of a division of a property, where there is relief for the taxpayer.
Distributive justice
If your relationship breaks down, the question arises of what happens to the house. If it is sold, it can be sold to a third be, but just as easily a internal regulation In which one partner ‘buys out’ the other. This also has a different impact fiscally.
When both ex-partners jointly own the home, the buyout by one of the parties is legally not a sale, but a distance-distribution.
In that case, no sales charge is due, but the so-called distribution right, which in Flanders 2.5% amounts. This apportionment right is lowered to 1% if the following conditions are met:
- In case of division or distance between ex-spouses, after the divorce, or if given effect by the divorce;
- In case of division or distance between former legal cohabitants, provided that:
- The distribution or distance occurs within three years After the official end of the legal cohabitation; and
- The legal cohabitation at least one year continuously has lasted.
If you only cohabiting was, you cannot enjoy this reduced duty, and the rate of 2.5% applies anyway.
This reduced rate, also known as the ‘misery tax’ called, applies not only to the family home, but to any property of which the ex-partners are joint owners.
Please note: if one partner completely buys out the other and consequently remains as the sole owner after this division, the distribution right will be calculated on the total sales value of the property, not just on the share taken over.
Refund of registration fees in case of rapid resale
Do you decide to resell your home soon after purchase? Then you may be able to claim a refund of registration fees on quick resale.
Flemish regulations provide that the sales law which was paid at the time of purchase in whole or in part can be retrieved by the taxpayer when the property is within a period of two years is resold. Thus, this refund is not automatic, but must be explicitly requested by the taxpayer.
Moreover, this refund is bounded and subject to strict formal requirements. Thus, the refund will be limited to 3/5 (60%) of the registration fees paid.
Will the property be sold for a lower price than the purchase price? Then the refund will be calculated on the lower sales price.
In addition, a number of additional conditions/concerns apply.
Term for resale
The resale must take place within two years, counting from the date of the authentic act of purchase to the date of the authentic act of sale. The term is therefore calculated from day to day.
The date of the private sale agreement (compromise) is irrelevant here. The property must effectively by notarial deed have been sold before the expiration of the two-year term.
Applicable rate at time of purchase
The refund is only possible if at the time of purchase the normal sales law of 12% was paid.
If a reduced rate was applied at the time of purchase (for example, 2% for the sole owner-occupied dwelling), first additional duties to 12% are paid. Only then can the refund of registration fees be calculated.
In practice, this arrangement is usually of little use in such situations, as the buyer is usually here no net tax benefit achieves, given the much lower rate of 2%. Only when the buyer has not met the retention conditions of the reduced rate, namely domiciliation within three years of purchase and effective, continuous occupancy of at least one year, can a refund of registration fees be of interest, because in this case the buyer will owe additional fees of up to 12% (plus a penalty on the additional fees) anyway.
No application in case of purchase under VAT
Finally, this scheme applies only if at the time of purchase registration fees were paid.
Was the property purchased under the VAT system, then this regulation does not apply, given that it refers only to Flemish sales rights.
Do you have questions about your specific situation?
Contact our pro experts. We are happy to review with you which scheme applies and how you can make the most of it.