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The Belgian government has always had a strong focus on companies involved in R&D activities and provides support via a large number of tax incentives for employers as well as employees.

Innovative income deduction: As from 1 July 2016, the new Innovation Income Deduction replaces the former Patent Income Deduction. Companies can now deduct up to 85% of their net innovation income, which may result in an effective corporate tax rate of 5 percent. Not only granted patents fall within the scope, but also copyrighted software and process innovation. The qualifying income comprises royalties, license fees (embedded in sales prices), as well as capital gains. Further to the BEPS Report on Action 5 (“Modified Nexus Approach”), the tax deduction is calculated on the net income and subject to a specific formulae.

Patent Income Deduction: A grandfathering period for qualifying patent income to benefit from the old regime exists until 30 June 2021. Under the PID companies are entitled to an 80% deduction of their gross patent income from the taxable base..

Wage withholding tax exemption for R&D personnel: Companies that employ R&D personnel benefit from a partial exemption from payment of wage withholding tax. Only 20% of the withholding tax due of research personnel should be transferred to the Belgian tax authorities, provided  specific conditions are met. This tax measure results in an immediate tax benefit for the employer.

Investment deduction: R&D related investments in patents and new assets offer an increased investment deduction of 13,5% of the invested amount or 20,5% of the annual depreciation. The tax deduction may be converted into a refundable R&D tax credit. For tangible asset investments, companies can claim a 4% investment deduction (8% for SME’s).

Tax exemption of regional government grants: Subsidies granted by the Belgian Regional Institutions to support R&D are exempt from corporate tax.

The Belgian government foresees in specific tax benefits for foreign executives of multinationals working in Belgium. Foreign executives benefiting from the special expatriate tax status are treated as non-residents and are therefore only taxable on their Belgian source income. According to the special expatriate status, certain «expatriate allowances» or reimbursements of expenses can be claimed, and a so-called «foreign business travel exclusion» can be excluded from the taxable basis. Applications should be filed within six months following the month of employment in Belgium.

The Belgian authorities provide multiple forms of governments grants at the Belgian federal and European levels as well as from the Brussels Capital, Flemish and Walloon Regions. Government grants are amongst others available for start-up, growth, environment-friendly and innovative industries.

© Van Havermaet International 2024

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