Adjustment of VAT deduction for services on immovable property: What can you still do?

New VAT rules on immovable property that will apply in the Netherlands as from 1 January 2026 are expected to significantly increase the administrative burden for entrepreneurs. The measures specifically will impact the VAT treatment of high-cost services relating to renovations of immovable property. The measures have two main objectives: to level the playing field among real estate entrepreneurs and better align VAT deductions on investment services with their long-term use.  

What will change? 

Under the current VAT rules, entrepreneurs are only required to revise the VAT on major renovation costs for immovable property—initially deducted during the renovation—at the end of the year in which the renovation is first put into use. Because the right to deduct the VAT is assessed over a relatively short period (i.e., only the year of commissioning), various tax-saving structures have emerged in practice. This is particularly common in building renovations where VAT incurred on the renovations can be recovered by the owner renting out the property on a short-term basis in the first year in order to claim a VAT deduction (as such rentals are VATable), followed by VAT-exempt rentals in subsequent years. According to the State Secretary for Finance, this practice is undesirable as it creates an uneven playing field among real estate entrepreneurs. 

To discourage such practices, a new VAT adjustment period will be introduced for high-value investment services related to existing buildings. Affected entrepreneurs will need to monitor whether the original VAT deduction has to be revised due to changes in the VATable use of the renovation costs for up to four years following the year of commissioning (with a maximum of five years in total). 

Which services are covered by the new scheme? 

An immovable property-related service will fall under the new rules if all of the following requirements are met: 

1. The services relate to the long-term use of immovable property; 
2. The total cost of the services is at least EUR 30,000 excluding VAT; 
3. The services are put into use on or after 1 January 2026. 

The EUR 30,000 threshold per service is intended to prevent entrepreneurs from having to manage multiple adjustment periods for smaller renovations. Examples of relevant services include installing a new kitchen, painting window frames (inside and outside) or renovating a bathroom. In any case, it is essential that the services provide long-term benefits to the property. 

Adjustment period 

The standard adjustment period will be five years, similar to that for capital goods, although a 10-year period may be available based on EU case law. During the adjustment period, the VAT deduction may be revised if the use of the service changes from VAT-taxable to VAT-exempt, or vice versa. Taxpayers will need to determine whether an adjustment is needed for each service put into use on or after 1 January 2026. Separate adjustment periods and distinct start dates should be clearly documented in all cases. 

What can you do now? 

The new rules are expected to substantially increase the administrative burden on entrepreneurs. Proper preparation is key in helping to avoid undesirable VAT consequences and additional corrections. Affected entrepreneurs should begin now to identify services within their organization that will fall within the scope of the new rules, analyze whether internal processes are robust enough to allow for clear and efficient tracking of the use of each high-cost real estate service, and make any necessary adjustments. 

In certain cases, it may be beneficial to put investments into use before 1 January 2026, so they remain subject to the current scheme. Taking proactive steps now can help avoid additional obligations and potential VAT adjustments as from 2026. 

More information? 

If you have any questions about the upcoming changes or would like to discuss the implications for your situation, please do not hesitate to contact us. We are happy to assist you in finding the right solution.