Waiver Of Registration Duties In Case Of Amicable Termination Of A Private Sales Agreement – Real Estate

In case of amicable termination of a private sales agreement for
a property signed under condition precedent, the proportional
registration (evenredig registratierecht / droit
d’enregistrement proportionnel)duties that were levied may
be waived. In its decision of 21 December 2023, the Court of
Cassation clarifies the conditions. Although this decision concerns
a property located in Flanders, the pragmatic reasoning of the
court seems equally applicable to the similar regime foreseen in
the Brussels and Walloon regions.

Context

Registration of the sale of an immovable property must take
place within four (4) months of the signing of the private sales
agreement (onderhandse verkoopovereenkomst / compromis de
vente). Proportional registration duties of (in principle) 12%
(12,5% in the Brussels and Walloon Region), calculated on the sale
price, are then levied upon registration of this agreement.

In this context, the amicable termination (minnelijke
ontbinding /résiliation amiable) of a private sales
agreement would trigger a double taxation. The first taxable event
would be the conclusion of the private sales agreement, which
establishes the transfer of ownership rights to the buyer and
triggers the levying of registration duties. The second taxable
event would happen when the private sales agreement is amicably
terminated and where the ownership rights on the same property are
transferred again.

To avoid this unfair situation, a favourable tax regime is
foreseen in the Flanders Region since

1 November 2007, consisting in the application of a specific fixed
rate of 10 EUR.

In essence, instead of paying the proportional registration
duties of 12%, the parties only pay a total of 20 EUR (i.e.10 EUR
for the registration of the private sales agreement and 10 EUR for
the registration of the agreement containing the amicable
termination).

In case the private sales agreement was registered before the
agreement containing the amicable termination, the parties must
request a waiver (or refund) of registration duties on the private
sales agreement. When granting the waiver or refund, the tax
administration will withhold 10 euros for the registration of the
private sales agreement.

To profit from this specific fixed registration duty of 10 EUR,
following conditions must be met:

• The sale has not yet been authenticated in a notarial
  deed.




• All parties involved in the agreement declare this agreement
  amicably terminated. This declaration must be evidenced by a
  registered agreement, dated less than one year from the date
  of the first agreement (the 1-year period).

As we will see, it is this second condition that has retained
the court’s attention in this case.

Amicable termination and condition precedent: a pragmatic
approach

The dispute before the Court concerned the starting point of the
1-year period within which the declaration must be dated in case of
the conclusion of an agreement affected by a condition precedent
(opschortende voorwaarde / condition suspensive). Note
that a private sales agreement affected by a condition precedent
does not need to be registered right away. Therefore, the
obligation to register within four months and to pay the
registration duties only becomes due when the (last) condition
precedent is fulfilled.

In the case at hand, a private sales agreement was concluded on
7 December 2005, subject to a condition precedent of the delivery
of a positive soil certificate. This positive soil certificate was
only delivered on 19 November 2014. As the condition precedent was
fulfilled, the buyer submitted the private sales agreement to the
registration office on 18 March 2015.

The tax bill was sent on 4 August 2015. However, on 9 September
2015, a settlement agreement was reached with the seller whereby
the private sales agreement was amicably terminated. The settlement
agreement was only registered on 21 September 2017.

Thereon, the question was raised whether the registration duties
should still be paid.

The tax authorities considered the initial agreement concluded
on 7 December 2005 as the starting point, from which it would
follow that the favourable tax regime cannot apply given that the
1-year period had long since passed (i.e. deadline on 7 December
2006). Reference was made to multiple legal authors who considered
the signing date of the private sales agreement as the starting
point of the 1-year period. Some of these authors based their
reasoning on the civil law principle that an agreement subject to
conditions precedent already exists pendente conditione
and that upon fulfilment of the conditions the agreement was
deemed, under the Old Belgian Civil Code, to have existed since the
signing. Under new art. 5.147 of the Belgian Civil Code, a
condition precedent does not have, in principle, a retroactive
effect. Parties may however derogate to this provision and confer a
retroactive effect to the condition precedent.

However, in the case at hand, the Ghent Court of appeal (court
case 2 November 2021, nr. 2020/AR/1424), and now confirmed by the
Court of Cassation, did not agree with this limited reading of a
regime precisely established to remedy unfair situations of double
taxation and to have a less stringent, less formalistic and more
tax-efficient refund. The advocate-general referred in his
conclusion, among others, to the interpretation given by the tax
authorities, where it is made clear that the 1-year period starts
as from the fulfilment of the condition precedent.

To require, as the Flemish tax authorities argued, that the
amicable termination agreement must be concluded within one year of
the conclusion of the initial agreement under conditions precedent
would drastically reduce the scope of the preferential regime.

The Ghent Court of appeal also noted that the date of
registration of the second agreement is of no importance and is not
required within the same period. In the case at hand, the
settlement agreement was concluded within one year after the
delivery of the positive soil certificate (i.e. on 9 September
2015), thus being within the 1-year period. The fact that the
settlement agreement was registered on 21 September 2017 is
therefore irrelevant as the settlement agreement indeed entered
into within this 1-year period. Nevertheless, we can only advise
the parties to be careful to provide themselves with objective
evidence of the date of the agreement.

Through its position nr. SP 24002 dated 29 January 2024, the
Flemish Tax Authorities (VLABEL) have acknowledged this
interpretation.

Conclusion

This decision may be surprising from a civil law point of view
as well as from a literal reading of the Flemish Tax Code (VCF).
Indeed, an agreement subject to a condition precedent already
exists and it is only its performance that is suspended until the
condition is fulfilled. Therefore, one could have thought that the
1-year period could have started since the conclusion of the
initial sale agreement.

However, from a registration duties point of view, the
fulfilment of the conditions as starting point also corresponds to
the principle that the registration duties on an agreement subject
to conditions precedent shall be levied upon fulfilment of those
conditions.

In any case, as in real estate matters certain conditions
precedent easily take more than a year to be fulfilled, this
decision it is to be welcomed from a practical point of view.

Source: Cass., 21 Dec. 2023, nr. F.22.0033.N. (Dutch
only)

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