Thornsett Group

The city of tasteful tax breaks

Will luxe penthouses in Brussels appeal to British buy-to-let investors, asks Claire Carponen

Tax evasions was described by the Chancellor in Birmingham this week as “unacceptable at the best of times” and “morally indefensible in times like these”. The Conservative Party is more comfortable with tax avoidance than tax evasion, as seen its recent flirtation with Sir Philip Green, a man well connected in Monaco. Overseas tax havens may become an increasingly attractive prospect for British property investors since the rise in June in the capital gains tax (CGT) rate (now 28 per cent on the sale of second homes for higher-rate taxpayers) and potential further tax hikes in the Comprehensive Spending Review later this month.
If Monaco is a little flash for your tastes, consider Belgium. Not often mentioned in the same breath as the Cayman Islands and Bermuda, Belgium’s fiscal incentives for residents include low inheritance tax and no CGT on an investment property owned for five years or more.
However, political instability may deter British investors. It has been more than 100 days since Belgium had a government. Talks for a coalition fell through again this week and fears of political split between the Flemish and Walloon regions have created unease, not least the in the property market. “Not having a government is bad for real estate”, says Jean de Kerchove, of Immobiliére Le Lion, a Brussels estate agent. “The market is very slow. People are waiting to see what’s going to happen – and if the tax system is going to change.” Property prices have dropped 5 per cent on average since the global recession, de Kerchover says, but the market is correcting itself; prime properties valued too high have fallen by up to 20 per cent. Unlike London or Paris, Brussels did not experience price leaps in 2007. Lending is stricter and, on average, buyers need a deposit of 40 to 50 per cent. They also must pay a tax on purchase of 10 to 12.5 per cent.
“Brussels doesn’t have the sexy attractiveness of Paris and the weather is not particularly brilliant,” de Kerchove says. “People move her for the tax breaks.” To benefit, you have to become a Belgian resident and prove that you have ceased to be a UK resident. This has become more difficult, says Mike Warburton of Grant Thornton chartered accountants, after a recent ruling by the Court of Appeal, which found that Robert Gaines-Cooper, a Seychelles-based British tycoon, was a UK resident for tax purposes, even though he spent fewer than 91 days in this country.
Nonetheless, Thornsett Group, a developer, hopes that British buyers will be enticed to buy the seven penthouse flats it has just launched in Leopold Village, a mixed-use development in the Schuman area of Brussels. The development sits between the European Commission and European Parliament, overlooking Leopold Park, a short taxi ride from the Eurostar terminal. “It is very convenient for Eurocrats and a ten-minute walk from some very nice shops,” de Kerchove says. Two of the duplex and triplex penthouses have sold and another two are under offer. Prices start from €1.050million (£911,000). The flats are not especially big, but the floor-to-ceiling windows enhance the space and light, the metro-chic furnishings are luxurious but understated, and the terraces have sweeping city views.
“Rental contracts in Brussels are consumer index-linked, which is a protection against rising interest rates,” SAYS Eoghan Quinn, commercial manager for Thornsett in Belgium. “The typical lease period in three years, then six and up to nine.” He adds that landlords pay no tax on private residential rental income, and there is an excellent rental pool because of the huge transient population of diplomats and NGOs.
Most of the 65 remaining flats (out of 108) at Leopold Village gave been bought by Belgians, but British, Irish and Italian buyers have invested too.
Brussels is mocked for being a bit boring. However, it has a cool side, and high fashion, art and restaurants thrive. London St Pancras and Paris are less than two hours away and a new high-speed railway line, which opened last year, cut the journey time to Amsterdam to 1hr50min. Tax avoiders, however may prefer to emulate Sir Philip Green and travel by helicopter.