Investing in Real E
state in Belgium
Investing in Real Estate in Belgium
Editor Ariane Brohez
www.loyensloeff.com
As a leading firm, Loyens & Loeff is the natural choice
for a legal and tax partner if you do business in or from
the Netherlands, Belgium and Luxembourg, our home
markets. You can count on personal advice from any
of our 900 advisers based in one of our offices in the
Benelux or in key financial centres around the world.
Thanks to our full-service practice, specific sector
experience and thorough understanding of the market, our
advisers comprehend exactly what you need.
Investing in Real Estate in Belgium
Editor: Ariane Brohez
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Table of Contents
Introduction 3
Part I Real estate investments
I Entitlements to real estate 13I.1 General 13I.1.1 Immovable property 13I.1.2 Rights in rem 13I.2 The various rights in rem 14I.2.1 General 14I.2.2 Ownership 14I.2.3 Right to build 16I.2.4 Long-term lease right 17I.2.5 Usufruct 18I.2.6 The right of use and the right of occupation 19I.2.7 Easements 19I.2.8 Comparative table - rights in rem 20I.3 “Right on right” structures 20
II Investment vehicles 23II.1 General 23II.1.1 Available investment vehicles 23II.1.2 Belgian law as the law governing the company (lex societatis) 24II.2 Regular limited liability companies 24II.2.1 Incorporation of a NV / SA or BVBA / SPRL 24II.2.2 Main characteristics of the NV / SA and the BVBA / SPRL 28II.3 Property Funds (REIT) 31II.3.1 Retail REIT: Legal form, corporate profile and regulatory aspects 31II.3.2 Institutional REIT: Eligible investors, opportunities and key regulatory features
35II.3.3 Accounting aspects 36II.3.4 Tax aspects of Property Funds 37II.4 Debt fund and securitisation vehicle 38II.4.1 Legal form, corporate profile and regulatory aspects 39II.4.2 Tax aspects of non-tax-transparent debt funds 40
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III Realestatecertificates 42III.1 Civil and regulatory aspects 42III.1.1 General presentation 42III.1.2 Functioning of a real estate certificate 42III.2 Tax treatment 43III.2.1 General aspects 43III.2.2 Sale of real estate certificates prior to liquidation 44
Part II Real estate taxation
IV General features of the corporate income tax regime 47IV.1 Accounting treatment 47IV.1.1 General – Valuation rules 47IV.1.2 Acquisition 47IV.1.3 Financial lease 48IV.2 Corporate income tax system 48IV.3 Taxable entities 49IV.3.1 Resident companies 49IV.3.2 Small and Medium Enterprises (SMEs) 50IV.3.3 Non-resident entities 50IV.4 Computation of the taxable base 51IV.4.1 Gross profit determination 51IV.4.2 Tax deductions 54IV.5 Fairness tax 56IV.5.1 Taxable fact and taxpayer 56IV.5.2 Taxable base 56
V Taxation of real estate businesses 58V.1 Corporate income tax 58V.1.1 Operational lease 58V.1.2 Financial lease 59V.1.3 Foreign company investing in Belgian real estate 60V.2 Registration duties – Transfer taxes 60V.3 VAT 61V.3.1 Warehouse space 61V.3.2 Parking space 62V.3.3 Hotel accommodation 62V.3.4 Financial VAT lease 62V.3.5 Right to perform a professional activity 63V.3.6 Right in rem on a building 63V.3.7 Shopping centres 64
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V.4 Regional and local taxes 64V.4.1 The derivative tax autonomy 64V.4.2 The own tax autonomy 65V.4.3 Regional and local taxes related to the real estate in a nutshell 65
VI Taxation of real estate transactions 67VI.1 Share deals 67VI.1.1 Corporate income tax in the hands of the seller 67VI.1.2 Corporate income tax in the hands of the purchaser 67VI.1.3 Corporate income tax in the hands of the target company 67VI.1.4 Registration duties 68VI.1.5 VAT 68VI.1.6 Other taxes 68VI.2 Asset deals 68VI.2.1 Corporate income tax in the hands of the seller 68VI.2.2 Corporate income tax in the hands of the purchaser 68VI.2.3 Registration duties 69VI.2.4 VAT 69VI.2.5 Other taxes 71
VII Taxationofrealestatefinancing 72VII.1 Equity financing 72VII.1.1 Capital tax 72VII.1.2 Notional interest deduction 72VII.1.3 Major withholding tax exemptions on outbound dividends 75VII.1.4 Capital reduction 76VII.2 Debt financing 77VII.2.1 Deductibility of interest payments 77VII.2.2 Thin capitalisation rules 78VII.2.3 Interest payments made to foreign taxpayers 80VII.2.4 Interest payments to Belgian companies 81VII.2.5 Tax aspects related to the security package 82
PartIII Realestatefinancing
VIII Leverage 87
IX Loan documentation 88IX.1 General 88IX.2 Structuring flows 89IX.3 Control on flows 90
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X Security 91X.1 Types of security 91X.2 Security on immovable property 92X.2.1 Mortgage 92X.2.2 Mortgage Mandate 101X.2.3 Security over movable assets 104X.3 Security agents and trustees 111X.3.1 General 111X.3.2 Granting security to Security Agents or Trustees 112X.4 Financial assistance 113X.5 Corporate purpose and interest 115
Part IV Real estate management
XI Urban Planning 119XI.1 Introduction 119XI.2 Zoning plans 119XI.2.1 Regional Plans 119XI.2.2 Local plans 120XI.3 Building permits 121XI.3.1 Requirements 121XI.3.2 Procedure 121XI.3.3 Appeals 122XI.3.4 Infringements and sanctions 122XI.3.5 Transferability 122XI.4 Combined building and environmental permit procedure 122XI.5 Fire safety 123
XII Environment 124XII.1 Introduction 124XII.2 Environmental permits 124XII.2.1 Permit application procedures 125XII.2.2 Enforcement of environmental laws 125XII.2.3 Transferability of permits 126XII.2.4 Requirement of both a building and an environmental permit 126XII.3 Soil contamination 127XII.3.1 Flemish Region 127XII.3.2 Brussels Capital Region 132XII.3.3 Walloon Region 137XII.4 Asbestos 140XII.5 PCB’s 141
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XII.6 Cooling installations with R22 141XII.7 Energy performances of buildings 141XII.7.1 Legal framework 141XII.7.2 Procedure 142XII.7.3 When is an EPB Certificate required? 143XII.7.4 Enforcement 143XII.8 Environmental provisions and warranties 144XII.8.1 Real estate deals 144XII.8.2 Leases and soil condition 147
XIII Leases 149XIII.1 Introduction 149XIII.2 Operating lease vs. commercial lease 149XIII.3 Relevant terms 149XIII.3.1 Duration of leases 150XIII.3.2 Rent – Indexation – Revision 150XIII.3.3 Allocation of costs 151XIII.3.4 Alterations 151XIII.3.5 Maintenance and repairs 152XIII.3.6 Subletting and assignment 152XIII.3.7 Termination of leases 152XIII.4 General protective measures 154XIII.4.1 Registration – Transcription 154XIII.4.2 Rental guarantee 154XIII.4.3 Priority rights 154XIII.4.4 Survey of premises 155XIII.4.5 Article 45, 2°, paragraph 4, Mortgage Act. 155XIII.5 Overview of relevant provisions of the Commercial Lease Act 155XIII.5.1 Useful and important renovation works (article 7, Commercial Lease Act) 155
Part V Public-private partnerships
XIV PPP in a nutshell 161XIV.1 Overview of the PPP market 161XIV.2 Definition and types of PPP 161XIV.3 The PPP time-line 163XIV.4 Award and contractual aspects 163XIV.4.1 Public procurement 163XIV.4.2 Bidding phase 165XIV.4.3 Risk matrix 165XIV.4.4 Remedies 167
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XV Budgetary, accounting and tax aspects 169XV.1 ESA neutrality 169XV.1.1 Classification of the project company 169XV.1.2 Classification of the asset 170XV.2 Accounting and corporate income tax 171XV.2.1 Asset 171XV.2.2 Availability payments 172XV.2.3 Favourable tax treatment of financing 173XV.3 VAT 175XV.3.1 VAT qualification of the services rendered in the framework of PPP agreement
175XV.3.2 Supplies of services invoiced to the SPV 176XV.3.3 Supplies of services invoiced by the SPV 178
Contributors 182
Contact persons 183
Real Estate at Loyens & Loeff 184
Loyens & Loeff International 188
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© Loyens & Loeff, January 2014
This publication serves only to give a general overview of investing in real estate in Belgium. It does not aim
to provide an exhaustive analysis of all legal and tax aspects of these investments.
Although the guide Investing in Real Estate in Belgium has been compiled with great care, Loyens & Loeff
cannot accept any responsibility for the consequences of making use of this publication without its
cooperation. The contributions to this book contain personal views of the authors and therefore do not reflect
the opinion of Loyens & Loeff.
All rights reserved. No publication may be duplicated, saved in an automated database or made public, in any
form or in any way, whether electronically, mechanically, by photocopying, recording or any other manner,
without the prior written consent of Loyens & Loeff.
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Investing in Real E
state in Belgium
Investing in Real Estate in Belgium
Editor Ariane Brohez
www.loyensloeff.com
As a leading firm, Loyens & Loeff is the natural choice
for a legal and tax partner if you do business in or from
the Netherlands, Belgium and Luxembourg, our home
markets. You can count on personal advice from any
of our 900 advisers based in one of our offices in the
Benelux or in key financial centres around the world.
Thanks to our full-service practice, specific sector
experience and thorough understanding of the market, our
advisers comprehend exactly what you need.