Buying a home is more than a mortgage
Buying a home is monumental occasion. Whether you're starting fresh in a new city or building your dream house in the town that you fell in love with, buying a home is an exciting life decision. And, an expensive one. Most people can't afford to purchase a home outright and need a bank's assistance. Once that hurdle is cleared, there are the many fiscal implications of dealing with a large financial decision that most people aren't equipped to handle.
Enter Sabrina Van Roy, an estate planner by BNP Paribas Fortis who can help you understand the financial tax realities and challenges of being the proud owner of that dream home. Her very mission is to assist private banking clients with the legal and tax structure of their movable and immovable assets.
First she explains the straightforward steps of buying a home. “You need to make a written agreement between the buyer and the seller, which is normally sorted out by the real estate agent. The moment this agreement is signed, the property is considered sold, even though money has not changed hands. This first agreement is necessary to get a loan at a bank. In 2-4 months, that agreement will be confirmed and notarized, making the house officially registered in Belgium for all mortgages and taxes.”
As for the actual monetary amounts required, Van Roy indicates that banks normally ask for about 20%, although there isn't a legal minimum or maximum, just a standard used. If you're interested in more information on this, such as establishing good credit and how loans are approved, speak to a lending officer at BNP Paribas Fortis.
It is clear that once you buy a house, there are various taxes associated with it. However, this varies immensely based on numerous elements, such as location (Wallonia, Brussels or Flanders), and value of the home.
Starting with the registration tax, this is a flat rate paid to the government for buying a home. In Flanders, this is 10%, in Brussels it is 12,5% and in Wallonia, it is also 12,5%. However, there is a lower rate available of 5% in Flanders and 6% in Wallonia if the home fits the definition of a modest residence.
Also, if this is for the acquisition of your first house, you could also benefit of some exemptions or reductions (if some conditions are fulfilled). In Flanders, for example, there is an exemption on the first part of the selling price of €15K. Van Roy explains, “So if the house you want is in Flanders and costs €100K, you only pay the 10% tax on €85K.”
During your stay here in Belgium you'll be annually taxed on the possession of a property in Belgium. First you‘ll pay an annual advanced levy: each region has its own rules regarding the taxes. Second, all immovable property, such as your house, generates taxable immovable income that has to be declared in your annual income tax return, except for the time it is considered your main residence.
This is a lot to take in, especially for an expat who might not be as familiar with the nuances of Belgian tax law. Van Roy says you're not alone in being overwhelmed. In fact, she explains, “From the moment you have more than professional income, such as a home, it gets difficult to file taxes for yourself, and then if you add in elements that might offer tax breaks, such as a mortgage loan, you really need help to file.”
She breaks down the various elements, starting with the progressive tax tariff. “This means, the more income you have, the more you pay in taxes. The maximum is fixed at 50%. Whether the income is from property or a professional salary, it's all taxed together.”
Van Roy explains about the revenue on a house, “The way you are taxed depends on use of property. When you have a second residence used on the coast, it will be taxed differently than if it's used for professional use or as your main residence. It's all very specific. You need someone to help, as the rules can be very difficult.”
She would know; “I had to go to school for two years in Brussels to understand all this. I specialize in the Flanders region. My colleagues and I each have our own regions, to know the rules and peculiarities a little better, such as with the annual advanced levy. For example, when you have at least two children for whom you receive a children's allowance, you have a reduction. If you have a handicap, you have a reduction. But these reductions amounts change per region and even per year.”
As for the income tax return, Van Roy says, “This is your annual personal tax return and within this is where you would mention taxable immovable income, i.e. a house plus all your immovable property (except your main residence), all professional income, and income from movable property (savings), plus various income elements, such as the concession on the right to install mobile devices. This is also where you would put your reductions.” She jokes, “But the reductions are on various pages of the tax form - to make it easy, ha!”
“As for selling your home,” she continues, “you don't have to pay any back taxes. All reductions received stay and no new calculations are required. If you sell the family home or a house more than five years after you purchased it, no taxes are required no matter how much profit is made. However, if you sell a house (not the family house) in less than five years, you will pay 16,5% on the adapted added value – this is the difference between the price paid and the price sold taking into account certain costs and inflation.”
So whether you're eyeing your dream home, looking to purchase that coastal property or trying to get your financial affairs in order, contact your local BNP Paribas Fortis office. Experts, such as Sabrina Van Roy, are on hand to untangle the technical jargon, simplify and explain the specific tax laws related to your situations and assist you in making the right financial decisions.