In Belgium, there are a number of tax incentives for Research and Development (R&D).
A series of tax rules are in place to support R&D, such as the partial exemption of researchers from withholding tax.
The Belgian authorities also favor investment in R&D activities through a deduction on income from intellectual property rights.
Together, these rules make the Belgian tax system very favorable to companies that are involved in R&D and in the development and exploitation of patents and other intellectual property rights.
Withholding tax for researchers
The exemption from payment of the withholding tax (up to 80%) is granted to companies that pay or attribute remunerations to researchers who are engaged in R&D projects and who have a doctorate or a qualifying master’s degree.
Master’s degrees in the fields of exact or applied sciences, as well as civil engineering, medical sciences, veterinary sciences, pharmaceutical sciences, architecture and industrial sciences in agronomy are considered for the application of the reduction of the payment of the withholding tax.
Master’s degrees in social sciences (e.g. commercial engineering, law, economics,…) and humanities are excluded.
Before applying for the exemption, companies must notify their projects or programs to the BELSPO. After this registration no approval or right follows. The company is responsible for what is declared, the FPS Finance decides through audits whether the exemption applies or not.
Deduction on income from intellectual property rights
Belgium proposes a mechanism, similar to the Ip Box in France, which allows a deduction of 85% of the net income derived from innovation.
This concerns income generated from innovation, license fees, but also income from the sale of products and services up to the amount of the share representing the remuneration of the intellectual property (IP) or even the IP income integrated in the manufacturing process.
Capital gains from the transfer of IP rights as well as damages for infringement of IP rights are also covered. The income concerned must be exclusively attributable to an IP right covered by the scheme, such as a patent, copyrighted software, a monopoly granted by a public authority.
The amount eligible for the deduction is calculated by applying to the net income a coefficient (nexus), which must be determined separately for each of the rights concerned, and which corresponds to the ratio: Expenditure related to the IP right covered by the measure/All research and development expenditure.
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Written by
Plamen Petkov
