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Multiple property owners targeted by the tax authorities

Thursday 24/02/2022
Eigenaars van vastgoedpatrimonium geviseerd door de fiscus

The tax authorities have announced that they are stepping up checks on multiple property owners. What should you be aware of?

In principle, income from rental property is considered an immovable asset. However, the income of multiple property owners who rent out and manage their properties in a structured manner, may be considered professional income by the tax authorities, which is subject to higher taxation.

Cadastral income as taxable basis

If you own a property as a private person, you are currently taxed on the basis of cadastral income (CI). Your own home is exempt from CI, but any other property is taxed on the basis of the CI, irrespective of whether you rent it out to private individuals or don’t rent it at all and use it as a second home, for example. The actual rental income will only be taken into account if the tenant uses the property for professional purposes.

CI unchanged since 1975

The CI is determined by the government and is an estimate of the annual net rental value of a property on 1 January 1975. Costs incurred cannot be deducted from this amount, with the exception of potential financing costs. Since the government has deliberately failed to update the CI for the past 47 years, it may in many cases be lower than the actual net rental income.

Landlords pay less tax as a result of the CI system

The present CI system is not based on the current situation. It can be to the advantage or disadvantage of the taxpayer, depending on whether the property is rented or not. For example, private individuals who rent out several properties will in most cases be taxed on a much lower amount than the rent they actually receive. It is precisely this group of people that is being targeted by the government.

More rentals = more controls

The tax authorities have announced that they intend to step up checks on private individuals who rent out several properties. They will investigate whether organised rental activities are involved, which would make it a professional undertaking. In such cases rental income will be qualified as professional income. The taxable base will no longer be determined on the basis of the CI, but on the basis of the rental income actually received (after deduction of costs). Moreover, professional income will also be subject to social security contributions.

Blurred line between private and professional rentals

Because it is difficult to distinguish between the regular management of private assets and professional activity that involves privately renting out property, the issue can be a subject of discussion. In such cases the facts will be the deciding factor. Each situation will be assessed individually.

There are currently no guidelines that the tax authorities will take into ac-count. A legal regulation that defines a specific framework or maximum amounts would be welcome and would provide more legal certainty. At the moment it is difficult for taxpayers to assess this themselves. If at some point in the future this income is reclassified as professional income, and you as a taxpayer have not retained any documentary evidence of expenditure, the tax authorities may tax you on the basis of your gross income

No need to worry unnecessarily

Despite this extra vigilance on the part of the tax authorities, there is no need for you to be alarmed. The mere fact that you own several properties is not enough to qualify the rental activity as professional. The number of properties is only one of the elements taken into account in the assessment. In general, the tax authorities tend to reclassify rental income if it exceeds professional income. Or, if the time and money invested in rental activities is such that it cannot be anything other than a professional activity, similar to the activities of an estate agent. Possession of foreign property that is rented out will also be taken into account.

Prepare and keep track of costs

If the tax authorities have your personal situation in their sights, be pre-pared, which is why it is advisable to consider your situation now. You should also keep track of any expenditure, which could be used as a counter argument if the tax authorities think that you are receiving professional rather than property income.

Do you have further questions concerning this issue? We would be happy to take a closer look at your personal situation together with you, so feel free to contact our team

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An Lettens

An Lettens

Partner Tax & Legal Services

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Dimitri Lemeire

Dimitri Lemaire

Director Tax & Legal Services

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