Date on property sale contract decisive in whether purchases gets mortgage tax relief or a lower rate of registration tax

The Flemish Government announced that in future registration tax will no longer be levied when a purchaser signs a pre-sale agreement with the vendor, but instead when the deeds are signed at the Notary’s office and the property officially changes hands. This means that those buying a new property will either pay the current (higher) level of the registration tax and benefit from mortgage tax relief or pay the reduced level of registration tax (6%) that will come into force from 1 January 2020.  

Over the past week or so there has been considerable unease in the world of residential property. This has come about since the Flemish Government that it is to scrap mortgage tax relief on properties that officially change hands from 1 January 2020. 

Those that currently benefit from mortgage tax relief will be unaffected by the changes. At the same time those purchasing a new property will pay 6% registration tax on the sale rather than the 7% currently levied. The Flemish Government’s decision has caused a rush on property sales with sales up 40% in the last 10 days.   

Before Friday’s announcement it was unclear whether some buyers might be hit twice and have to both pay the 7% level of property sale tax as the sales agreement was signed before the end of the year, but be no longer able to get mortgage tax relief as the deeds to their new property hadn’t been signed over to them until after the start of next year.  

Now that the Flemish Government has decided that the date on which the deeds are officially transferred to the new owner of a property will be used as a reference this uncertainty has been cleared up.

However, although the reduction in the level of property sales tax by 1% means that the price paid for a property will be slightly less than it otherwise would have been, the fact that a purchaser will no longer benefit from mortgage tax relief means that he/she/they lose out to the tune of an average of 17,000 euro in the case of a single person and 37,000 euro for a couple.   

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