Remuneration Theory—Is the “Lusthuizen” Approach a Way Out?

Belgians have a passion for real estate. And enterprising Belgians will often satisfy their appetite for real estate through their (management) company. Depending on the circumstances, the business owner may use this approach to purchase commercial real estate for personal use or to rent out, invest in a home with a practice space that is partially available to the business owner, or even purchase an apartment on the boardwalk that has no direct connection to their professional activities. The costs associated with acquiring and maintaining this real estate may be tax-deductible, even if the property is made available to the business owner for personal use. In the latter case, however, the business owner is taxed on a so-called “benefit in kind” (“VAA”).

The problem often lies in the fact that this tax logic is only applied retroactively, particularly during administrative or judicial proceedings. Numerous court rulings have since shown that it is important for the intention to compensate company executives for those services to be present ab initio, namely at the time the company makes the investment. 

We therefore recommend, in such cases, drafting a compensation report in which the provision of the property is documented as part of the total compensation package. It is then up to the general meeting to confirm this annually. If additional factors are at play, such as potential capital appreciation (e.g., beachfront apartments) or possible rental income, a return-on-investment calculation can also be prepared to support the company’s interest.

The above logic also holds true only to the extent that the business manager actually delivers sufficient performance to justify the use of private real estate, with its associated costs. For the hardworking doctor, lawyer, or consultant who, hypothetically, is solely responsible for the company’s (often substantial) revenue, while receiving only a modest executive compensation, there should be no doubt about this.

Conversely, for a retired executive who retains permanent access to the private property, this will be less clear-cut. In the latter case, we will usually advise renting the property to the executive at a market-rate price going forward.

Our tax code contains a special provision regarding the tax deductibility of “vacation homes.” For tax purposes, this refers to a residence that is not primarily used for professional purposes and is not made available to employees or directors as their sole or primary residence. The quintessential example here is a country home. 

The provision contains an exception to the general rule that costs of vacation homes are not deductible when those costs are included in the beneficiary’s taxable compensation (through a VAA).

What is unique about this provision is that it was initially raised primarily by taxpayers. The taxpayers argued that this provision constituted an independent basis for tax deductibility, without the need to satisfy the remuneration theory. In other words, as soon as a VAA was charged, the costs should be tax-deductible. Both the Constitutional Court and the Court of Cassation rejected this argument in 2019 and 2020. The general deduction provision (of which the remuneration theory is an application) must always be satisfied, even for vacation homes.

Subsequently, the tax administration used the provision as an additional condition for tax deductibility. The tax deductibility of vacation homes would, in any case, have to be limited to the amount of the VAA. Although older case law followed this view, the Court of Cassation recently, on June 18, 2026, definitively rejected it. As a result, the tax authorities have once again failed in their attempt to challenge the free provision of real estate by a company to its manager.

The Court confirmed that the deduction is not automatically limited to the flat-rate VAA. However, this does not mean that all costs are automatically deductible. The taxpayer must still demonstrate that the general provision for the deductibility of costs (e.g., through the remuneration theory) is met.

The debate over the tax deductibility of costs associated with private real estate will undoubtedly continue to rage. As long as there is a significant discrepancy between the costs involved and the taxable income of the business owner, this will remain a thorn in the side of the tax authorities and an attractive tax opportunity for enterprising taxpayers. In the longer term, therefore, legislative intervention cannot be ruled out.

In our view, the tax deductibility of real estate used partly for private purposes (e.g., a residence with office or practice space) remains defensible, provided that the business owner performs sufficient work and that the intention to make the property available for business use is thoroughly documented.

The same should apply when the company purchases only the usufruct of this residence, although it is to be expected that the legal battle will be even more intense. And although a residence used exclusively for private purposes (whether or not it is a vacation home) should, in principle, be defensible, we note that the tax authorities often find a way to challenge this.

In any case, for every new case, we will immediately evaluate the “exit” strategy as well, so that the home can still be transferred to the private estate should case law, legislation, or the factual context change.