Real estate development: beware of the deduction of selling expenses

In real estate development (new residential projects), the building is often sold to the buyer by one company and the land by another.
The Ghent Court of Appeal recently handed down a ruling on the deduction of selling costs (advertising expenses, agents’ commissions, etc.) in a case where these costs were borne in full by the company selling the buildings, without a proportion being borne by the company selling the land.
The tax authorities had rejected the deduction of part of the costs on the grounds that there was no intention to acquire or retain taxable income (article 49 ITC).
The Court of Appeal (Ghent, May 2, 2023) followed the position of the tax authorities and considered that, by bearing the full costs, the company had incurred costs which had resulted in the acquisition of taxable income by another company (the owner of the land). It ruled that the deductible share should be calculated on the basis of the breakdown of the sale price as set out in the notarial deeds.
The conclusion is that it may be prudent to apportion costs between the seller of the buildings and the seller of the land.