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How to benefit from the Belgian tax opportunities for Research & Development?

Belgian tax opportunities for Research & Development?

Get the most value from your R&D activities.

Get the most value from your R&D activities.

The Challenge

Belgium has been a prime location for companies involved in R&D activities for years, supported by a comprehensive set of tax incentives. With the new Innovation Income Deduction (IID), the tax friendly climate for R&D will continue to be available for companies. Besides the development of patents, also innovative software solutions and process innovation may unlock new tax opportunities.

Bringing together the expertise of different departments (e.g. R&D, HR, Finance, …) may sometimes be a hurdle for companies to identify applicable tax incentives for R&D. Documentation, quantification and obtaining the required certificates may also constitute a barrier to effectively claim the benefits. If your company is an innovator and investing in R&D, make sure you do not miss out on any of the tax breaks.


KPMG Approach

KPMG’s R&D Tax Incentives Group has vast experience in identifying, valorizing and claiming tax benefits for innovative companies.

We can help you to:


  • Evaluate R&D projects for tax efficient outcomes, quantify potential savings and feasibility;
  • Develop supporting documentation required for tax and regulatory purposes, including transfer pricing;
  • Obtain an advance tax ruling providing upfront certainty on the tax situation;
  • Apply the R&D tax incentives in your tax return, reporting and accounting systems;
  • Access our global network of R&D Tax Incentive specialists.


The Benefits

Reduced tax rate for innovation income: Following the conclusions of the OECD BEPS Report on Action 5 (“Modified Nexus Approach”) and the agreement at the European Code of Conduct Group regarding patent box regimes, Belgium replaced its major tax incentive for R&D. As from 1 July 2016, the new Innovation Income Deduction (IID) replaces the former Patent Income Deduction (PID). Under the IID, companies can deduct up to 85% of their net innovation income from the taxable base, resulting in an effective corporate taxation as low as 4,44% (for financial years starting on 1/1/2018) and 3,75% as from 1/1/2020 (due to the lowering of the corporate income tax rate).

The IID applies to income from a broad range of qualifying intellectual property rights (IPR). Not only patents are within the scope of the IID, but also breeders’ rights, orphan drugs, data and market exclusivity and copyrighted software.

The qualifying income is also broadly defined and includes royalties and license fees, IPR income embedded in the sales price or attributable to, IPR-based process innovation, as well as capital gains.

In line with the Modified Nexus Approach, the deduction is calculated on the net IPR income and is subject to a specific formula in order to make sure that the preferential treatment is only granted to income derived from own R&D activities.

Patent Income Deduction grandfathered until 30 June 2021:
A grandfathering period for qualifying patent income to benefit from the old regime exists until 30 June 2021 provided that the patent in question has been obtained or applied for before 1 July 2016. Under the PID, companies are entitled to an 80% deduction of their gross patent income from the taxable base..

Reduced cost of R&D personnel:
Companies that employ researchers with a scientific master or doctoral degree benefit from a partial exemption from payment of withholding tax on their wages. They must transfer only 20% of the withholding tax due on the wage of these researchers to the tax authorities, while they withhold the 100% that would normally be due. The measure has thus no impact on the individual income tax situation of the researchers and generates a cash subsidy for the employer.

As a result of the Belgian corporate income reform, this withholding tax exemption now also applies to scientific bachelor degrees. As from 1 January 2018, employers can exempt up to 40% of the wage withholding tax for their bachelors engaged in R&D programs. As from 1 January 2020 the exemption will even increase to 80%.Please note that the total withholding tax exemption for bachelors is capped at 25% of the total withholding tax exemption applied for masters and doctors.

Deduction for investments in patents and R&D assets:
R&D related investments in patents and new assets related to R&D can lead to an increased investment deduction of 13,5% of the invested amount or 20,5% of the annual depreciation (assessment year 2017). It is also possible to convert the deduction into a tax credit (at 33,99%), which is cash refundable if not used within the next four tax assessment years.

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

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