The sale of a 5 year old (or less) building
Before the reform, if you sold a first property to a private individual within 5 years after finishing the construction of the building, the sale was subject to VAT.
Therefore, if you were selling an apartment off plan or a house you had built within these 5 years, the sale was subject to VAT and the buyer would have only to pay reduced notary fees. Besides that, although you had to transfer the VAT on the selling price to the Inland Revenue, you were able to deduct the VAT you had paid on the purchase price/construction.
The payment of the VAT is restricted by the reform to the sale within the 5 years of an off plan apartment (= VEFA: Sale of property for future completion).
For a private individual, this rule implies the following:
• 1st case: the individual sells an off plan apartment within the 5 years before completion. The sale is subject to VAT (with the right to deduct the VAT amount he paid on the purchase price) and the buyer pays reduced notary fees. In that case, the rule is the same than before the reform.
• 2nd case: he sells a house he had built, within the 5 years before completion. Then, the sale is not subject to VAT but to transfer taxes (standard notary fees around 6-7% of the purchase price), paid by the buyer. Also, the vendor cannot deduct the VAT on the construction.
• 3rd case: he sells a property that he renovated and that can be classed as a new build, within the 5 years. In that case, the VAT is not charged if the property is sold by a private vendor. On the other hand, if a professional sells a renovated property, it is classed as a new build sale and will be subject to VAT.
The last two cases involve brand new solutions for private vendors: on one hand, you cannot get the VAT back on a construction and, on the other hand, the buyer cannot benefit from reduced notary fees.
Examples
You bought a property in 2008 and you sell it this year.
• 1st case: the property is an off plan apartment/house. The VAT is charged since the property is sold within the 5 years, and the buyer benefits from reduced notary fees.
• 2nd case: you sell a house you had built. The VAT is not charged and the buyer pays standard notary fees.
• 3rd case: It is an old property (house/apartment) that you fully renovated. The VAT is not charged and the buyer pays standard notary fees.
In conclusion, the brand new concepts are:
• Purchasing subdivided land could be subject to reduced notary fees.
• Selling a house you had built, within the 5 years, is not subject to reduced notary fees anymore.