Many business owners wonder whether they should buy property as a private individual or through their company. “A split purchase offers an interesting compromise,” says Stijn Paredis, Sales Manager at Antonissen. "Under the split purchase, the company buys the temporary usufruct of a property, for up to 30 years, while the manager purchases the bare ownership of the property, as a private individual.”
A split purchase offers several interesting financial benefits. “The company can write off the purchase for the duration of the usufruct and use or rent the property for business purposes,” says Paredis. “Costs such as taxes, insurance and maintenance can be borne by the company. At the end of the period of usufruct, the business owner becomes the full owner of the property, without having to pay additional taxes.”
Obviously, the tax authorities are also very aware of the advantages of this construct and are careful to ensure that the value of the usufruct is calculated correctly. “An overvaluation may be considered as an unjustified private benefit, resulting in additional personal income tax and social security contributions,” Paredis warns. “Depreciations and professional expenses can also be partially rejected, resulting in the payment of additional corporate tax. So you can see why a correct calculation of the value of the usufruct is so important.”
Funnily enough, there are no set rules for calculating the value of the usufruct of a property. For a long time, the Ruysseveldt method was widely applied,” says Paredis. “This takes the rental income for the usufructuary into account, with a discount applied according to the OLO (linear bonds) interest rate. Recently, this method has come under fire, however. “Low interest rates increase the value of the usufruct. This has prompted the Ruling Commission to come up with its own valuation method. This is based on a higher discount rate, dividing the annual net rental value by the value of the property, and resulting in a lower usufruct value.”
A practical example of how the method of the Ruling Commission works, as elaborated by the tax consultants at Lemon Consult
For a term of 20 years, the value of the usufruct is €172,050 = 250,000 x (1-(1/1.06)^20), or 68.82% of the value of the full ownership.
Although the tax authorities often prefer the Ruling Commission method, it is not the only method to be applied. Based on previous court rulings, each situation is unique and factors such as inflation and rent indexation also play a role. “If the Ruysseveldt method was correctly applied, the tax authorities cannot just intervene. Moreover, there is also such a thing as a ‘presumption of correctness’ that applies to taxpayers. The tax authorities thus need to prove errors were made. Determining the value of the usufruct is not an exact science. This needs to be done on a case-by-case basis.”
Investing in real estate remains one of the most effective ways to grow your wealth, thanks in part to the leverage effect. In this InFocus video, Sven Potvin, CEO of Antonissen Development Group, explains how real estate investors can benefit from three types of leverage. Additionally, real estate provides protection against inflation, as property values and rental income increase alongside general price levels. New-build properties are particularly attractive in this regard, offering long-term value retention and higher rental yields. Discover in this episode how to make the most of these strategic advantages!
In this Infocus video, Stijn Paredis, Commercial Director at Antonissen, takes you through the different tax scenarios when purchasing a property in Belgium. Want to learn more? Feel free to contact us. Looking for your first home or an interesting investment? Antonissen is here to help!
In our newest Infocus video, investment expert Stijn Paredis explains why student housing is a smart choice, both for beginners and more experienced investors. With a predicted shortage of as many as 4,000 student rooms in Antwerp by 2030 and rental income that is inflation-proof, this niche segment offers a future-proof investment opportunity. Stijn explains the leverage effect and how professional student halls of residence offer optimal comfort for residents in addition to being a hassle-free investment.