Indexing of cadastral income for material and equipment has been frozen since 1998. In Flanders, the property tax rate for material and equipment was reduced from 2.5% to 1.78% for (tax year) 2014.
In practice, however, the reduction to the property tax rate is less relevant due to the expansion of exemptions for material and equipment. The existing exemptions were somewhat limited: only new machines (no second-hand machines) and only surplus cadastral income from a replacement investment were eligible.
If due to both limitations taxable cadastral income remains, from now on this will be reduced by the amount of investments made in new machines on the same property. Hence, there is a double tax advantage for investments in new material and equipment, because:
- New material and equipment is exempted from cadastral income
- The same cadastral income is also deducted from the taxable cadastral income on an existing investment in material and equipment
This is an incentive for continuing investments in material and equipment in Flanders.
The additional exemption is only is applicable to all investments in new material and equipment during the years 2014, 2015 and 2016. Because the taxable base for property tax is set on 1 January of the tax year, the measure takes effect starting in tax year 2015.
Note: those who fail to comply with the energy decree have no right to an exemption.