New Belgian Innovation Profits Deduction ( IPD )

Transcription

1 New Belgian Innvatin Prfits Deductin ( IPD ) After the ablishment f the patent incme deductin, Belgian gvernment annunced n 2 December 2016 a new tax deductin fr innvatin prfits. In line with the recmmendatins made by the OECD in the BEPS actin plan, Belgium wants t create a tax friendly envirnment fr innvative research and develpment activities. Enterprises making their wn R&D effrts may benefit frm a tax deductin f up t 85% n the future prfits generated by intellectual prperty rights (resulting in an effective tax rate f 5.1% n qualifying prfits). It may be well wrth the effrt fr enterprises and SMEs with substantial R&D activity t examine whether they can benefit frm this new tax incentive. SCOPE EXTENDED TO PLANT VARIETY RIGHTS AND PROTECTED INNOVATIVE SOFTWARE The IPD applies n prfits resulting frm the explitatin f fllwing intellectual prperty rights: Patents and additinal prtectin certificates Plant variety rights applies fr after 1 July 2016 r acquired after 30 June 2016 Orphan medicinal prducts (limited t the first 10 year after registratin) applied fr r acquired after 1 July 2016 Data r market exclusivity rights granted by a cmpetent authrity n crp prtectin chemicals prtected under applicable EU law r similar rules f natinal r internatinal law during the first 10 years f prtectin Cpyright prtected sftware prviding that this sftware is created in the cntext f an R&D prject r prgramme The cmpany applying fr the deductin has t be the full wner, c-wner, usufructuary, licensee r rights wner ( rechtenhuder ). As cmpared t the previus patent incme deductin, the scpe f the IPD has been substantially extended.

2 PROFIT FROM INTELLECTUAL PROPERTY RIGHTS The new deductin is applicable n ryalty incme r n deemed ryalties, i.e. ryalties that a cmpany wuld have t pay under arm s length cnditins fr the use f the prtected technlgy, rights r sftware. It has nw been clarified that the new deductin als applies n prcess patents, indemnities and capital gains. Special cnditins apply fr capital gains t qualify: it is required that the intellectual prperty right has been created during the previus tax year r, in case f an acquired right, that the acquisitin has taken place in the previus 24 mnths; the deductin nly applies if the realised capital gain is reinvested within 5 years (r befre stpping prfessinal activities) in R&D prjects in view f btaining ther intellectual prperty rights CALCULATION OF NET PROFITS The IPD is calculated n the net prfit generated by qualifying intellectual prperty rights. The calculatin is made fr each single right as fllws: grss revenue is all revenue (e.g. ryalty fees r deemed ryalties included in the price charged fr prducts) received in cnsideratin fr the use f the rights; net prfits equal grss revenue reduced by the fllwing amunts: expenses fr R&D directly related t qualifying intellectual prperty rights. Overhead expenses (expenses nt directly linked t the R&D functins) and csts relating t buildings r financing d nt have t be deducted csts fr the acquisitin f intellectual prperty rights fees paid t ther parties (related r unrelated) in cnsideratin fr R&D services Page 2 f 5

3 It cmmnly ccurs that, shrtly after cmpletin f R&D, expenses relating t R&D exceed the generated revenues. In such case, the excess balance has t be carried frward t future tax years. A cmpany can als pt t depreciate the R&D expense (fr purpses f applicatin f the IPD) ver maximum 7 years. Specific recapture rules apply in case the intellectual prperty rights are transferred and/r if the cmpany des n lnger apply the IPD during the depreciatin term. LIMITATION TO QUALIFYING PROFIT FOR OWN R&D EFFORTS As recmmended by the OECD ( mdified nexus apprach ), the IPD nly applies t the extent that the taxpayer demnstrates that the qualifying intellectual prperty right is the result f wn R&D effrts r R&D wrk perfrmed by unrelated parties (e.g. universities, independent research ffices,...). Qualifying prfit will be reduced t the extent that R&D wrk is utsurced t related entities r that qualifying rights are acquired. Fllwing frmula will be used t calculate qualifying prfits: ( A + B ) * 1.3 A + B + C + D A equals direct expenses fr the taxpayer s wn R&D effrts. B equals expenses fr R&D wrk utsurced t unrelated parties (r t related parties recharging such expenses withut mark-up). C is the amunt f expenses fr R&D wrk utsurced t related parties while D equals the expenses fr the acquisitin f intellectual prperty rights. The numeratr is then increased by 30% (the result f the fractin is hwever capped at 1). The new IPD will apply t a maximum extent if a cmpany is perfrming all R&D wrk itself (r is nly subcntracting R&D wrk t unrelated parties. The IPD will be reduced t the extent that mre R&D effrts are utsurced t related entities and/r rights have been acquired. If, despite the fact that a crprate taxpayer is perfrming substantial R&D activities, the fractin results in a lw deductin, it is pssible t apply fr a specific ruling allwing a higher IPD. Since these rulings have t be shared with ther EU members states and the EU Cmmissin, we expect that this exceptin will nly be granted in very exceptinal circumstances. Page 3 f 5

4 85% DEDUCTION THAT CAN BE CARRIED FORWARD The Innvatin Prfit Deductin then equals 85% f qualifying prfit. The percentage f this deductin can be changed by Belgian gvernment withut any interventin f parliament being required. It is expected that the amunt f the deductin may be adjusted upward. Unclaimed IPD (e.g. in absence f sufficient taxable incme) can be carried frward during an unlimited perid f time. CLAIM OF THE IPD PENDING THE APPLICATION FOR AN INTELLECTUAL PROPERTY RIGHT The IPD can already be claimed pending the decisin n whether the intellectual prperty right will be granted r nt. Frm a tax technical pint f view, this cnditinal exemptin cnstitutes a tax exempt reserve in the crprate incme tax return. This reserve is tax exempt if the right is finally granted. In case the applicatin fr the right is n lnger pending r if the right wuld nt be granted, the exempted reserve will be subject t crprate incme tax. SPECIAL DOCUMENTATION REQUIREMENTS The IPD has t be claimed by using a specific tax frm t be filed tgether with the crprate incme tax return. Taxpayers need t dcument all elements used fr the calculatin f the IPD (e.g. amunt f grss revenue, nature f R&D expenses fr each IP right,...). The dcumentatin file has t cmprise real (market) value f intellectual prperty rights acquired frm a related entity calculatin f grss revenue calculatin f net prfit calculatin f the fractin fr qualifying prfits In case it wuld nt be pssible t make all calculatins fr each single intellectual prperty rights, calculatins may be aggregated by prduct/service based n a set f intellectual prperty rights. Page 4 f 5

5 APPLICATION FOR SME As ppsed t the patent incme deductin, the IPD des n lnger cntain specific exemptins fr small and medium sized enterprises (SME). This shuld nt be an bstacle fr these rganisatins t benefit frm the IPD. Our ffice has extensive experience in assisting SMEs in these matters and will make available a dcumentatin set allwing als innvative small cmpanies t claim IPD n the prfits generated by their R&D wrk. Page 5 f 5