Could cuts to the Flemish Municipal Fund trigger a new wave of municipal property taxes increases in 2027?
Cuts to the Flemish Municipal Fund are putting increasing pressure on local government finances. As municipalities look for additional sources of revenue, could property tax surcharges rise again in 2027? And what would this mean for businesses owning property in Flanders?
Flemish budget agreement puts pressure on municipal finances
One of the most significant measures in the Flemish government's 2027 budget agreement is a €1.1 billion reduction in funding through the Flemish Municipal Fund, which provides financial support to cities and municipalities across Flanders.
In addition to a reduction in the annual indexation of general municipal funding from 2027 onwards, supplementary funding for major urban centres will also be cut. Cities such as Antwerp, Ghent, Bruges, Ostend and Leuven are expected to be particularly affected.
The key question now is how Flemish local authorities, having only recently finalised their multiannual budgets for 2026–2031, will address this unexpected funding shortfall over the coming years.
Municipal property tax surcharges and differentiated rates as key revenue levers
One of the main tools available to municipalities to generate additional revenue is the municipal surcharge on property tax (onroerende voorheffing). This annual tax consists of a regional component, a provincial component and, typically representing the largest share, a municipal component. Under their fiscal autonomy, municipalities can determine their own surcharge rates. The fact that no fewer than 56 Flemish municipalities increased their surcharges in 2026 speaks for itself.
This autonomy was further expanded from the 2019 tax year onwards with the introduction of differentiated municipal surcharge rates. Municipalities in Flanders can therefore apply different rates depending on the nature of the property, the category of taxpayer or the level of cadastral income. In practice, this often results in businesses bearing a higher tax burden, even when they are not explicitly targeted.
In 2026, 30 additional municipalities made use of this possibility, bringing the total number of Flemish municipalities applying differentiated rates to 42. Of these, 40 municipalities impose higher surcharge rates on businesses, either directly or indirectly. In 24 municipalities, the existing standard rate was maintained.
Will affected municipalities turn to higher property tax surcharges?
Against this backdrop, it is entirely possible that cities such as Antwerp, Ghent, Bruges, Ostend and Leuven will decide to adjust their municipal property tax surcharges for the 2027 tax year to keep their multiannual budgets balanced.
The question is whether they will opt for a general increase or favour a more targeted approach through differentiated rates, potentially placing a greater tax burden on businesses.
How can businesses optimise their property tax?
Considering these developments, the following areas are becoming increasingly important:
- Reviewing and optimising cadastral income, which forms the taxable basis for calculating property tax. Property-related changes, such as new construction, renovations, changes of use, demolitions or the subdivision of land, are important opportunities to assess whether the cadastral income should be reviewed or optimised.
- Making use of available property tax reductions and exemptions, particularly those relating to unproductive properties. Construction or renovation works, as well as the process of bringing a property to market, may also give rise to opportunities for tax reductions or exemptions.
The experts in ABV Development's Real Estate Tax Team assess whether cadastral income has been correctly determined and identify opportunities to optimise the taxable basis. We also support businesses in identifying and applying for the property tax reductions and exemptions available under the applicable legislation.
