An entrepreneur is entitled to deduct input tax insofar as this input tax is attributable to his taxable transactions. So if an office building is rented out with VAT, for example, there is a right to a deduction in advance. But what if such an immovable property is vacant for a certain period of time. A distinction must be made here between vacancy before the first occupation and vacancy afterwards.
Vacancy before first occupation
In the event of vacancy of immovable property before the first occupation of the immovable property, the tax must be reviewed during the first occupation. This means that the right to deduct tax included in the costs of the immovable property must be reassessed in its entirety upon first use.
Vacancy after first occupation
The VAT deduction for vacant premises after first occupation depends on the intention that the entrepreneur has with the vacant (part of) the property. If the intention is to use the property for taxable transactions, this must be substantiated with objective data. The order given to the real estate agent, the nature of the immovable property and the location of the immovable property may be important here.
Revision in the event of vacancy
Any revision of the deduction in the event of vacancy is calculated on the basis of the (intended) actual use of the immovable property, despite the fact that no use takes place due to the vacancy. The intended actual use can, for example, be determined on the basis of the spaces that will be used for the taxed and the exempt services (for example m2 or m3). In case of consecutive vacancy, the intended actual use must be calculated over time.
Deduction of maintenance costs and other costs in the event of vacancy
If costs are incurred in the year of vacancy for the maintenance of the immovable property (such as costs for cleaning, heating and security), these costs are consumed immediately without a direct and immediate connection with a taxed outgoing performance because it is missing (vacancy). For the deduction of input tax on the costs, the maintenance is linked to the intention that the entrepreneur has with the vacant immovable property or the vacant part thereof. This intention must be substantiated with objective data. The order given to the real estate agent, the nature of the immovable property and the location of the immovable property may be important here.
Deduction for services that are only used after taking into use
For purchased services that - other than the maintenance costs - are only used when (part of) the immovable property is put into use (again) (such as costs for improvement and expansion), the deduction of input tax instead on the basis of the taxable use made plausible with objective data. However, at the time of first putting into use, the deduction of input tax is revised upon putting into use.
This article was originally published on KRC Van Elderen website at https://www.krcvanelderen.nl/actueel/btw-aftrek-bij-gedeeltelijke-leegstand-van-onroerende-zaken
