Brussels, 3 June 2010
VAT: The Commission calls on Belgium to amend its legislation on the reduced VAT rate for certain transactions involving buildings
The European Commission has given Belgium two months to amend its legislation applying, subject to certain conditions, the 6% reduced rate to supplies of residential buildings and building works. Under Belgian law, a reduced rate is applied to the first EUR 50 000, while the balance of the taxable amount remains subject to the standard rate of 21%.
The VAT Directive lists the operations which may be subject to the 6% reduced rate of VAT. They include the "provision, construction, renovation and alteration of housing, as part of a social policy".
Belgian law provides for the application of the reduced rate of VAT to the first EUR 50 000 without, however, any reference to "social policy". Because the scheme is general in nature, the Commission considers it outside the scope of the restrictive list figuring in the Directive.
The EUR 50 000 threshold specified in Belgian law does not serve to differentiate between homes eligible for the reduced rate of VAT and those subject to the 21% standard rate. It simply places a ceiling on the financial advantage accorded by the State.
The Commission considers, moreover, that a taxable amount cannot be artificially split so that one part is subject to a reduced VAT rate and the other to a standard rate. Doing so would in practice lead to multiple rates, whereas the VAT Directive in principle provides for the application of no more than two reduced rates in addition to the standard rate.
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