Buying a second residence: let’s talk money

1. A second residence in Belgium

An apartment by the sea, a chalet in the Ardennes, a little house in a holiday park… thanks to a second residence in Belgium, you can relax without being on the road for hours. When you read the following information carefully, you don’t even have to worry about the financial part!

Second residence tax: property tax

Everyone who owns any real estate, has to pay a property tax. The same goes for a second residence. The amount you pay depends on the cadastral income.

What is the cadastral income (C.I.)?

The cadastral income is a fictive income: the yearly net income IF you would rent out the house. It’s based on the rental prices of the year 1975.

Besides the C.I., the municipality where your second residence is located influences the property tax. Do you want to know the exact numbers? Calculate it here!

Watch out: you can get some grants or reductions for your main residence (for example for your kids). These benefits disappear when it concerns a second home.

A holiday home by the sea, a student flat in the city, a second residence abroad… What’s your dream?

Cadastral income and personal income tax

You have to mention your second residence on your tax return, whether you rent it out or not. More specifically, you pay taxes on the non-indexed C.I., increased by 40%. It might seem like it’s a lot, but there’s good news too: you can deduct the interests on your home loan. The remaining amount will be taxed with the highest tax rate.

Do you rent out your second residence? Your taxes depend on your renter: individuals or companies.

You rent to individuals

When you rent out your house unfurnished, the ‘normal’ rule applies: you pay taxes on the C.I., increased by 40%. In case the house is furnished, the 40% is considered movable property. For movable property, taxes are slightly different. Firstly, a flat rate of 50% is deducted. On this part, you pay 15% of taxes. The remaining part of the personal income tax will be paid on the remaining C.I., increased with 40%. The interests on your home loan can be deducted.

You rent to companies

When you’re renting out to individuals, you’re still taxed on the C.I.. That changes when it comes to renting to companies. In this case, your taxed on the real rental income. This means: the yearly rent minus a flat rate of 40% of the rental income (with a maximum of 2/3 of the C.I.). The interests can be deducted in this situation too.

Municipal taxes

At last, there are municipal taxes. These taxes depend on the municipality your house is located. Besides that, in some provinces, you pay a provincial tax too. Every municipality decides if it asks a flat rate for waste and environment or not. Inform well! 

2. A second residence abroad

Countries with a double taxation treaty

Belgium signed a double taxation treaty with multiple countries. If your second residence is located in one of these countries, you will only be taxed over there, and not in Belgium. This means you only pay taxes once for your second home.

That doesn’t mean you don’t have to indicate your income. This defines, together with the remaining Belgian taxable income, the tax rate. Chances are your second home makes you end up in a higher tax bracket. When you rent out the house, you must indicate the yearly rental income (minus the taxes paid abroad). This amount is deducted with a 40% flat rate. The final amount is added to your other income and taxed with the highest rate.

Countries without a double taxation treaty

If your second residence is located in a country without a double taxation treaty, you do have to pay taxes in Belgium. This amount is defined by your fictive gross rental value or the real rental income. The foreign paid taxes can be deducted. Already paid taxes abroad? Good news! You get a reduction of 50% in Belgium!

3. Costs to take into account

Whether you invest in a second home in Belgium or abroad, these costs must be taken into account in every case:

• The common costs for an apartment or holiday park. All owners pay for the maintenance of the common parts.
• Don’t forget about the fire insurance!
• In your second residence too you must pay for water, gas, electricity, internet…

Relaxing in your own holiday home: check!

A second residence, it’s a combination of benefits and costs. You can generate extra income by renting out, but you also have your own place to relax. Let’s make it clear: it’s worth it!