6% VAT on demolition and reconstruction: lack of decision makes renovators uncertain
Will we continue to pay 6% on demolition and reconstruction or will we soon rise again to 21% VAT?
People who want to demolish or rebuild their homes will remain uncertain for a while. The government has not yet made a final decision on this post-corona measure. Do you want you have a home demolished or rebuilt?
This is what you should take into account.
Until the end of 2023, the construction sector can use the reduced VAT rate on demolition and reconstruction. The NAV wants the government to extend this arrangement. No decision has been made yet.
Nevertheless, the NAV believes that there is sufficient reason to continue to apply the reduced rate of 6%. The NAV says that this mainly depends on the space in the budget.
Where does this arrangement come from?
The scheme was created by the government during and after the corona crisis. The measure gave the construction sector a boost. However, the NAV believes that the support measure does not last long enough.
The government has set a period of 12 months. According to the construction sector, this time period is too short for entering into and completing demolition and reconstruction projects. A construction project of this size can easily take 2 to 3,5 years. Depending on the scale of the reconstruction or demolition project
In addition to the fact that both the construction sector and the NAV find the validity of the measure too short, this sector experiences even more disadvantages. The workload increases due to the limited duration of the reduced VAT rate. If the pressure on projects, contractors and employees increases, this can be at the expense of quality and safety on construction.
Many projects are paused because there is no clarity yet about the VAT rate.
While the construction sector is already in deep trouble. The purchase prices of building materials are skyrocketing and interest rates continue to rise. The fact that the government continues to postpone its decision on the measure is doing more harm to the construction sector than good.
Reduced rate for demolition and reconstruction: possibly also for renovations
The NAV advocates its permanent introduction reduced 6% VAT rate for the construction sector. The 21% VAT rate should only apply to new construction, as is currently the case. The reduced VAT should not only become the standard for demolition and reconstruction, but if it is up to the NAV also for renovations of homes.
This prevents confusion. Because when do you call something renovating and when is it demolition?
The Network of Architects Flanders also believes that the VAT rate for both contractors and architects should be equalized at 6%. The work of an architect is now seen as a service. As a result, they are automatically classified in the 21%, but in fact these activities also contribute to construction or reconstruction.
When will a decision be made about the VAT rate?
The Belgian government is only willing and able to provide a definitive answer to the VAT scheme after the budget has been carefully examined. This should be completed in the first week of October. The NAV indicates that it is not waiting for an extension of the reduced VAT rate, but is opting for permanent implementation.
That is also what is stated in the proposal. The government has to make decisions, but the outcome remains 50/50. What is certain is that the lack of a decision will cause a lot of uncertainty in the construction sector.
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