How to invest in property in Belgium with the TREVI network

The benefits of buying in your own name

Buying in your own name allows you to benefit from more direct taxation. Residential rental income is not directly taxed as such. However, the indexed cadastral income multiplied by a coefficient of 1.40 must be included in your tax return. That amount is then taxed.
The choice of loan is also crucial. Tax provisions allow the full amount of mortgage interest to be deducted from the increased cadastral income. You therefore need to weigh up different formulas: a traditional mortgage loan, a bullet loan, a loan with decreasing interest, and so on. It should also be noted that property income for which the tenant benefits from a tax deduction, such as an office, a shop or a liberal profession, leads to higher taxation for the owner. In fact, 60% of this type of rental income is added to the taxpayer’s taxable base.

Setting up a patrimonial company to invest

A patrimonial company offers two major advantages. On the one hand, it makes it possible to take the real costs of the assets into account, whether these concern works, insurance, property tax, but also acquisition costs, registration duties, VAT or notary fees. On the other hand, it makes it easier to transfer the assets to your loved ones through a simple transfer of shares or a donation.

In return, two major disadvantages must be considered. Rental income, after deduction of the expenses incurred, is taxed under corporate income tax. In addition, the capital gain realised on resale is also taxed at 29% under corporate income tax. While the 1980s and 1990s were often a time when real estate assets were built up through patrimonial companies, it must be noted that this trend reversed at the beginning of the 2000s. A reduction in corporate income tax could once again make this solution attractive. It also remains possible to transfer the shares of the company holding the properties in order to avoid tax on the capital gain, but we prefer to leave it to specialists to inform you about the tax consequences that follow.

Investing in bare ownership and usufruct: principles and benefits

This is a formula that is becoming increasingly popular among investors for two main reasons. From an inheritance perspective, acquiring the usufruct of a property by a parent and the bare ownership by the children makes it possible for them to become full owners upon the parent’s death without paying a single euro in inheritance tax. From a tax perspective, certain investors may acquire the bare ownership in their own name and have the usufruct purchased by a company, for example a management company. This type of structure, framed by clear tax rules, makes it possible, at the end of the usufruct period, generally 20 years, to transfer the assets from the company to the owner as a private individual.
On this point, we would like to draw the investor’s attention to the following: make sure you are guided by an experienced tax specialist or your notary in order to remain fully within the applicable tax framework. We can recommend specialists if you wish. Where relevant, it may also be necessary to organise a donation of the usufruct to the bare owner before the deed of purchase. It is therefore important to seek advice before finalising the signing of a preliminary sales agreement.