1. The obligation to renovate for non-residential buildings
In its pursuit of a carbon-neutral building stock, the Flemish Government introduced an obligation to renovate for non-residential buildings. This was done through its Decree of 9 July 2021 amending the Energy Decree of 19 November 2010 on the introduction of an obligation to renovate for non-residential buildings and provisions on the energy-performance certificate for non-residential buildings.
Non-residential buildings are buildings whose primary use is an office, for commerce, “horeca” (acronym for hotel, restaurant, catering), and tourist accommodation, but not for any industrial purpose.
If an immoveable property has multiple uses, it is considered non-residential if 50% or more of the usable surface area is used for non-residential purposes.
The new regulation, which entered into force since 1 January 2022, mandates owners, heritable building right holders, and emphyteuticaries to carry out the necessary renovation works within five years from the date of deed execution authenticating the purchase or the date of the creation of a heritable building right or of an emphyteusis, in order to attain the following minimum energy-performance levels:
- Minimum roof insulation: if the minimum R-value of 0.75 m2K/W for roof insulation is not achieved by the time of deed execution, then the roof must be insulated to a maximum U-value of 0.24W/m2K;
- Solar-control glass: glass must be replaced only by glazing with a maximum U-value of 1W/m2K;
- Central heating systems older than 15 years on the date of deed execution must be replaced by a new heat generator unless it can be demonstrated that the space heating system meets the minimum system requirements for renovation, as described in Schedule XII of the Energy Decree of 19 November 2010;
If there is a natural gas main in the street, then it is forbidden to install any new oil-fired boiler there;
- Cooling systems that are older than 15 years on the date of deed execution and that use cooling agents based on ozone-depleting substances or cooling agents with a GWP value of at least 2,500 must be replaced by cooling systems that do not use such cooling agents.
These measures form the basis of the obligation to renovate. In addition, the following energy-related measures must be implemented, depending on the floor surface of the building:
- Small non-residential unit: these are parts of a building with a usable floor surface of 500 m2 maximum. The building has a maximum usable floor surface of 1000m2.
If the full ownership of all of these parts are transferred after 1 January 2022, or if an emphyteusis or heritable building right on them is created after this date, then an energy performance certificate of minimum C-rating must be presented within five years from the date of deed execution.
You could also opt to achieve a minimum of 5% energy from renewable sources starting from 1 January 2023.
- Large non-residential building units (“not small”): if full ownership of all of these parts is transferred after 1 January 2023, or if an emphyteusis or heritable building right on them is created after that date, then a minimum of 5% energy from renewable sources must be achieved within five years from the date of deed execution.
After renovation works have been carried out or after the expiry of a 5-year period after deed execution, the owner, heritable building right holder, or emphyteuticary itself must do everything necessary to apply for a new EPC in which it must show that the obligation to renovate has been fulfilled. (The date introducing the EPC for large non-residential units is set for 1 January 2023 – if this does not take place then, the right holder must check by itself whether it has fulfilled the regulation).
Failure to fulfill the obligation to renovate is punishable by administrative fines of EUR 500 to EUR 200,000. Caution: this does not exempt the right-in-rem holder from having to fulfill the measures.
2. Adapted tax incentives for new constructions and major energy-related renovations and home reconstructions
2.1 Reduction of real estate withholding tax
The Decree of 19 November 2021 amending the Flemish Tax Code (Vlaamse Codex Fiscaliteit) of 13 December 2013 on real estate withholding tax reduction for new constructions and the conditions for applying the lower tax rate to purchases of sole-residence homes with an undertaking to carry out major energy-related renovations or to demolish and reconstruct has made the E100 requirement (known as the “E Level” in Flanders, and E100 Level under EU regulations) more stringent as from 1 January 2022 for those who want to benefit from a real estate withholding tax reduction for new constructions.
Immoveable properties for which an environmental permit has been applied between 1 January 2022 through 31 December 2022 are eligible for a 50% or 100% real estate withholding tax reduction if they attain a maximum E Level of E20 and E10, respectively.
For environmental permit applications submitted before 1 January 2022, the E Level that had to be attained was even E30 and E20, respectively.
The reduced real estate withholding tax is valid for a period of five years starting from the year of assessment following the year in which the E Level was attained.
2.2 Registration tax reduced
This Decree of 19 November 2021 also reduced property registration tax (in Flanders) from 6% to 3% for sole residence homes purchased by natural persons and the deed of which was executed after 1 January 2022.
Natural persons who purchase a home as their sole residence from 1 January 2022 and who undertake to carry out major energy-related renovations or partial reconstruction benefit from an additional reduced tax rate and pay only 1% registration tax instead of 3%.
A major energy-related renovation is renovation consisting of the complete replacement of at least the systems for spatial heating, spatial cooling, and warm water in sanitary facilities and the insulation of at least 7% of the partition structures that enclose the protected volume and that form as a barrier to the external environment (roofs, windows, façade walls, floors). For major energy-related renovations, an architect must be called on and a building permit must be applied for.
For building permit applications submitted after 1 January 2022 for the purpose of a major energy-related renovation, the EPB requirements have become more strict. An E Level of E60 maximum (instead of E70) must be attained.
If you are a buyer, you must file an EPB declaration within 6 years from the date of deed execution in which it shows the attainment of the required E Level, and you must live for 6 years in the same address as the home you purchased.
If these conditions are not fulfilled, you will owe additional registration tax.