News article

Constitutional Court sees no problem in abolishing reduced VAT for sales of homes rebuilt after demolition

From 2024, the reduced VAT rate of 6% no longer applies to the sale of homes rebuilt after demolition that meet the so-called social conditions. The tax authorities provided a transitional arrangement for projects for which the environmental permit had been applied for by 30 June 2023, which has since been extended to 30 June 2025.

The Constitutional Court was asked whether charging 21% VAT on the sale of homes that meet the so-called social conditions after demolition and rebuilding does not violate the principle of equality and non-discrimination compared to the case where a builder can have a house demolished and rebuilt at 6% VAT if it meets the same so-called social conditions.

According to the Court, on the one hand, that sale and, on the other hand, the case in which a builder himself has a house built on his own behalf are not similar transactions. Nor does the new regulation discriminate against building promoters (who sell the houses) compared to contractors (who carry out the work for the builder). The difference in treatment between these two categories of VAT payers is sufficiently justified according to the Court.

Even though this judgement is less good news for property developers, the 6% VAT on the sale of houses rebuilt after demolition will soon be reintroduced. This plan has been included in the recent coalition agreement. The intention is to limit the maximum surface area to 175 square metres (instead of 200).

Const. Court, 20 February 2025