New revision periods for large-scale renovations and improvements

What is changing?

Until the end of 2025, renovation or improvement works on immovable business assets were generally subject to a VAT revision period of five years. However, this period was extended to fifteen years where the works were so substantial that they could be regarded as new construction (so-called “reconstruction”).
The supply of a new building is in any event subject to a fifteen-year revision period. Where a building is optionally leased with VAT, a revision period of twenty-five years applies.

However, a judgment of the Court of Justice of the European Union (Drebers, C-243/23, 12 September 2024) calls these rules into question. As a result, the draft legislation extends the fifteen-year revision period for immovable business assets to “renovations that display characteristics comparable to those normally attributed to immovable business assets”.

From now on, the decisive criterion is the economic useful life of the building after completion of the works. If the renovated building acquires the functions and characteristics of a new building, the fifteen-year revision period applies. In practice, this assessment will need to be made on a case-by-case basis.

Indicators for applying the 15-year revision period

In practice, it will therefore be necessary to determine which revision period applies to works performed on immovable business assets. Discussions between the VAT authorities and taxable persons are to be expected.
Although an administrative circular providing further guidance has already been announced, the explanatory memorandum already lists several indicators that may point to an economic useful life comparable to that of a new building:

• The construction works extended over several years.

• The works resulted in a major renovation of the building.

• Extension works were carried out, such as the addition of a glass annex or an elevator shaft.

• The construction works involved a significant cost.

• The renovation and construction works have an economic useful life equivalent to that of a new building.

When do the new rules apply?

These new rules apply as from 1 January 2026, irrespective of the date on which the taxable event occurred and the VAT became chargeable in respect of these transactions, provided that:

• the right to deduct VAT has not yet become definitively acquired as at 1 January 2026;

• and the VAT revision still falls within the revision period based on the new rules.

Please note that these new provisions cannot be applied retroactively by the tax authorities in order to revive a revision obligation to the benefit of the Treasury. Conversely, a VAT revision in favour of the taxable person may revive. A taxable person may therefore claim a revision in their favour under the new rules for the remaining years of the new revision period.

Our VAT specialists are happy to assist you with the analysis and application of these new rules.