The low VAT rate of 6% for demolition and reconstruction work is coming to an end. The federal government did not agree to extend this measure. “An irresponsible policy,” according to Flemish Minister of Budget and Finance Mathias Diependael.
Last week, the sector association Embild sounded the alarm, because the deadline to extend the measure was approaching. Anyone who demolishes and rebuilds their home can enjoy the premium VAT rate of 6% instead of 21% for a few years.
But the measure – introduced in 2020 to boost the construction sector during the Corona crisis – is undergoing reform. This can be read in the papers on Wednesday MediaHouse. No consensus has been reached among the majority parties to extend this, the office of Finance Minister Vincent van Petegem (CD&V) confirms. The cancellation is a setback for people with renewal plans.
Flemish Minister of Finance and Budget Mathias Diependel (N-VA) reacted sharply and spoke of an “irresponsible policy.” “Vivaldi has kept the construction sector in a state of legal uncertainty for years by not providing a long-term perspective on this action,” says the N-VA Secretary. According to Diependale, many Flemings were relying on the reduced VAT rate to realize their project. But costs will rise by 15 percent on January 1. “I fear that many Flemish people will put their project on hold for reasons of affordability,” says Diependel.
“At a time when building and borrowing your own home has become more expensive, the federal government is ignoring the construction plans of many Flemish people. This decision taken by Minister Van Petegem will certainly be felt by the construction sector,” concludes the N-VA Minister.
Other tax measures
Last week, construction union Embild also sounded the alarm. “This tax incentive is the way to make our aging housing stock energy neutral quickly and in a timely manner,” said Nico Demeester, CEO of EmBuild. “Recent years have shown that this incentive works very well.”
The reduced VAT was retained in Finance Minister Vincent van Petegem’s original tax reform plan (CD&V). The income that the state will lose due to the value-added tax reduction has been compensated elsewhere. However, his tax reform proposal was canceled just before the summer break. The parties of Vivaldi’s government failed to reach a mutual agreement.
“If this VAT reduction is not extended beyond 2023, the cost of active construction and renovation will become much more expensive for consumers,” Demeester warns. The temporary 6 percent VAT reduction on solar panels, solar boilers and heat pumps on homes less than ten years old will also end at the end of 2023. The building federation also wants to see this tax incentive extended permanently.
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