Archive 2 March 2009 - Real Estate Newsalerts

2 March 2009

Welcome to the third issue of our PwC Real Estate Tax Services Newsalert Belgium. In this issue, we provide some tax ideas to consider in today's real estate environment and we update you on recent tax incentives for energy-efficient real estate.

• Some tax ideas to consider in today’s real estate environment
  In today's real estate environment, minimizing needless tax costs and tax risks is key. Hereafter you find some ideas in a nutshell to maximise (future) cash from your real estate projects.
• Update on some recent tax incentives for energy-efficient real estate
  Environmental regulations and the trend of increasing fuel prices have put sustainable development and energy efficiency of buildings higher on the agenda. Also the Belgian tax environment is turning green.
• Our upcoming seminars
  • Emerging Trends in Real Estate Europe, 3 March 2009.
  • Unlocking value from Real Estate, 24 March 2009.

We trust that you find the above information useful. Should you have any questions, please contact us.

Best regards,

Some tax ideas to consider in today’s real estate environment

In today's real estate environment, minimizing needless tax costs and tax risks is key. Hereafter you find some ideas in a nutshell to maximise (future) cash from your real estate projects.

• Belgian property taxes are due regardless of whether the real estate company is profitable or loss-making. However, in cases of vacancies and subject to certain conditions, the property taxes paid can be recovered. Note that the rules differ slightly in each of the three Belgian Regions and that any recovery requests should be filed in a timely manner.
• The market conditions for financing have dramatically changed since September 2008. To meet the “arm’s length test” for group financing (e.g. shareholder loans), companies should check whether third parties would be willing to finance or maintain financing under the conditions currently in place. This especially holds true for group loans that have to be renewed, that are automatically renewable every year or that can be cancelled by one of the parties at a reasonable cost.
• As you may know, Belgian tax law provides for a tax incentive referred to as “notional interest deduction”, according to which Belgian companies and Belgian permanent establishments are allowed to deduct an amount of notional interest based on their adjusted net equity at a rate fixed by reference to the 10-year linear Belgian government bond. The new rate for assessment year 2010 (financial years ending from 31 December 2009 to 30 December 2010) is 4.473% (compared to 4.307% for assessment year 2009).
• Additional depreciation or write-downs on real estate (e.g. reflecting the yield shift in the current market) will only be tax-deductible if the Belgian GAAP and tax requirements are met. The Belgian Rulings Commission can be contacted for confirmation that the tax conditions are met in a given case.
• In a market of yield decompression, some transactions will be done at values below net book value. You should be aware, however, that in such cases it is arguable that the tax value of your capital loss can be (totally or partially) priced in as a premium on the share price.
• In Belgium, most real estate transactions are VAT-exempt and therefore do not allow for recovery of related input VAT. VAT grouping – one of the measures taken by the government in 2007 to make Belgium more attractive for business – can be a useful instrument to help avoid the non-recoverable VAT cost generally arising from real estate dealings.

Update on some recent tax incentives for energy-efficient real estate

Environmental regulations and the trend of increasing fuel prices have put sustainable development and energy efficiency of buildings higher on the agenda. Also the Belgian tax environment is turning green.

• In the second half of 2008, the Flemish Government introduced a new tax measure for energy-efficient buildings located in the Flemish Region. Indeed, as from 1 January 2009, buildings (both residential and non-residential) with limited energy-levels (E-peil/niveau E) can benefit from reduced property taxes based on their level of 'primary energy consumption'. The reduction will amount to 20% or 40% (the latter percentage for the most energy-efficient buildings) of the property tax due. The reduction is limited to a 10-year period and will be granted after an energy-efficiency certificate has been obtained.
• Energy-saving investments made in 2009 (assessment year 2010) can, subject to certain formalities, result in a one-off investment deduction amounting to 15.5% of the invested amount. The non-utilised part of the investment deduction can be carried forward.

Our upcoming seminars

Emerging Trends – Real Estate Europe, 3 March 2009, PwC Brussels

Joint presentation PwC/Urban Land Institue of the 6th Emerging Trends in Real Estate Europe 2009 survey.

Unlocking value from Real Estate, 24 March 2009, PwC Brussels

During this seminar, we will give an overview on solutions to unlock value from real estate. In times where credit and equity become more expensive and harder to find, real estate can indeed offer an alternative way to attract financing.

This seminar will provide an overview of:

• Reasons to unlock the value of property
• How unlocking property value helps to maximise shareholder value
• Different transaction structures
• Different key-elements of a transaction
• Legal framework of a transaction
• Tax & accounting treatment
• …..

When: Tuesday 24 March at 16.30 PM
Where: PwC Woluwe Garden, Woluwedal 18 – 1932 Brussels

For additional information, please contact Isabelle Jacobs.