What does the capital gains tax for real estate entail?

 General

You are planning to sell your property, so you have already thought about a possible sales price. If you can make a profit on the purchase price that you paid at the time, this is certainly an advantage. But watch out! If you plan to sell the property within 5 or 8 years after the purchase, you may have to pay capital gains tax. This tax is levied on the profit made on sales.

A distinction is made between undeveloped (land) and built-up immovable property (buildings) when determining capital gains tax.

Grounds

First we look at the capital gains tax when one has an undeveloped property. You pay capital gains tax if:

• The land is sold at a profit
• There is less than 8 years between the notarial deed of the purchase and the sale of this land

A capital gains tax of 33% is paid if there is less than 5 years between the purchase period and the sale period. This percentage is levied on the amount of the profit. If the period between purchase and sale is between 5 and 8 years, you pay 16.5% (half of the original capital gains tax). If you only decide to sell this land again after 8 years, in normal circumstances you do not pay capital gains tax when you make a profit.

Buildings

When you sell a property for a profit and there is less than 5 years between the notarial deed of the purchase of the property and its sale, you pay 16.5% tax on the profit you make on the sale. You also pay 16.5% if you start constructing a new building within 5 years after purchasing a certain land, or if you sell it within 5 years after it has been put into use or leased.

When one sells one's own home (family home), no capital gains tax is levied. The family home is a home where people live with the family and where they have established their domicile. The condition is that you have lived in the home for at least 6 months in the 12 months before this sale.

Exceptions

However, there are some exceptions to the capital gains tax for homes or land owned by:

• Minors
• Mentally ill
• People who were declared incompetent

In these cases, when one sells land or a building with a capital gain, one falls under the exceptions. If a capital gain is realized as a result of an expropriation of building land or a building, no capital gains tax will be paid on this. Furthermore, no capital gains tax is levied when a property is sold with capital gain after an inheritance. It is important to mention that inheritance tax is subject to inheritance tax. If the property is sold after inheritance at a higher price determined in the inheritance tax return, additional inheritance tax will have to be paid on the surplus value between these two amounts. This rule applies until 2 years after the date of the inheritance declaration.

It is important to mention that when you make a donation you are again subject to capital gains tax. This is the case if the property is sold within three years after the deed of donation was drawn up and within 5 years in which the donor purchased the property (or 8 years if it concerns land).

The calculation of the capital gains tax

To determine the taxable basis, the sales value must be deducted from the purchase value. If this amount is positive, you have made a profit and may be subject to capital gains tax. When calculating the purchase value of the home, an increased purchase value is still taken into account. A flat rate of 25% purchase costs is often taken into account, unless one can prove with proof that the costs were higher.

If renovation work has been carried out on the property by a registered contractor, this can also be taken into account. Furthermore, the purchase value is increased by 5% for each full year that has passed between the purchase and the sale. The sales value only takes the sales value into account. Sales costs are not included. Sales costs include, for example, an estate agent's fee or publicity costs.

If you would like more information  , please do not hesitate to contact our real estate experts at Kasper & Kent.