Buying a vacation home and the consequences for VAT
Investing in vacation homes is booming. More and more private and institutional investors are opting for a fixed–value investment in recreational real estate. Buying a recreation home may have consequences for the value added tax, abbreviated VAT.
What is VAT?
Before we tell you more about the options that apply when buying a recreation home, it is important to know what is VAT and what is it for? VAT is an abbreviation for the words Value Added Tax. VAT is a form of tax that consumers pay on goods and services. VAT is an important source of income for the government. They use the income from VAT and other taxes to finance government expenditure; all of this can be found in the national budget.
What is the influence of VAT on the purchase of a recreation home
Now that it is clear what VAT is and what it is for, we will discuss the consequences of VAT when buying a recreation home. The purchase of a new recreation home in The Netherlands is subject to the general VAT rate of 21%. VAT is also payable on a home within two years of the first use. Under certain conditions it is possible to reclaim the VAT. This depends on how the home is used.
Usage can be divided into three options
- The vacation home is purchased for recreational personal use only.
- The recreation home is being purchased as an investment and it is fully available for rental.
- The recreation home is intended for partial personal use and for the remainder of the period it will be made available for rental.
VAT consequences with personal use
If you buy a recreation home for recreational personal use, there is no entrepreneurship involved. The VAT paid on the recreation home cannot be reclaimed.
VAT consequences when fully renting out
When you purchase a recreation home to rent out in full, the VAT that has been paid can be }reclaimed. Renting out a home is seen as entrepreneurship. When fully renting out this means that the home must be available to rent out all year round.
VAT consequences with a combination of personal use and renting out
When buying a recreation home for partial personal use and renting out, it is also possible to reclaim VAT. The part that you can request back depends on your personal use of the home. When purchasing the home you agree on how often you will use the home yourself in order to determine a percentage.
Get informed and ask for advice
When purchasing a recreation home, there are certain choices that have consequences for VAT and any refund. Buying a recreation home therefore has tax consequences. But by making optimal use of the tax options, you can increase the return on the investment. To use this, it is important to discuss the specific circumstances with an advisor.