Belgium: Accounting rules on real property rights revisited

05 August 2014

The Belgian Commission for Accounting Standards has issued a draft opinion announcing its (to some extent, fundamentally) changed view on the accounting treatment of certain beneficial ownership rights on real property (such as usufruct, long-term lease, building rights, etc). The new accounting treatment is said to be closer to the economic reality but collides with the classic legal understanding of the nature of such rights.

Although the opinions of the Belgian Commission for Accounting Standards are not supposed to have any impact on the tax treatment, it intrinsically influences the tax treatment if a taxpayer does indeed follow the Commission's opinion, given that the tax basis is determined on the basis of the financial statements.

Taxpayers should therefore carefully consider the potential impact of this draft opinion on their real property structure (already in place or yet to be set up).  For instance, as a consequence of the new draft opinion, while any gains or profit from a one-off upfront payment could be spread in time over the duration of the underlying usufruct right, it seems that all profit should now be recognized (without any deferral over time) in the year in which the real property right has been granted.