Belgian R&D tax incentives "What did Belgium choose to offer and why?" Brent Springael 18 May 2017
Key Figures
Scoreboard Report 2016 EU Member States' Innovation Performance page 3
Scoreboard Report 2016 page 4
10 reasons to invest in R&D in Belgium Belgian R&D Centre People Activities Investments - Wage withholding tax exemption - Tax allowance for the manager of total quality department - Innovation premium - Expat tax regime - Transfer pricing rulings - Investment deduction - R&D tax credit - Accelerated depreciation - Tax exemption for regional grants Intellectual Property - Innovation box exemption page 5
Wage withholding tax exemption "Encouraging the hiring of the competent people"
Wage withholding tax exemption Definition 80% of wage withholding tax on researchers' salaries must not be remitted to Treasury (benefit to employer) Net salary 20% Wage WHT 80% WHT remitted WHT retained by employer page 7
Wage withholding tax exemption Conditions (depending from enterprise category) Young Innovative Companies that pay salaries to scientific personnel (researchers, research technician or R&D project manager with degree requirement) 15% R&D spend 10 years Turnover of 7.3M Balance sheet total of 3.65M 50 employees Enterprises that pay salaries to researchers in the context of a collaboration agreement with a university and/or scientific institution Enterprises that pay salaries to researchers with a specific degreeand who are employed in R&D projects and programs Mandatoryadvance notification of R&D projects and programs Description of the project/program Expected start and envisaged end date Framework agreement Optional ruling procedure Impact 15% -20% decrease of salary costs page 8
"Encouraging R&D investments" R&D Tax Credit
R&D Tax Credit Definition Increased deduction or tax credit for qualifying R&D investments that have no negative impact on the environment 13.5% (one-off) / 20.5% x capitalized investment = (additional) deduction at 33.99% 13.5% (one-off) / 20.5% x capitalized investment x 33.99% = tax credit (refundable if not used after 5 years) Total investment cost Amortisation page 10
R&D Tax Credit Conditions Qualifying investments are (i) patents(not previously used in Belgium for professional purposes); or (ii) fixed assets used to increase R&D of new products or future technologies that have no impact on the environment or seek to limit the negative effects on the environment Investments must be activated under Belgian GAAP R&D carried out by R&D center (separate BS and P&L for R&D activities) Certificate from region confirming absence of impact on environment Impact 4.5% -7% net saving on R&D investments page 11
Innovation box "Encouraging the exploitation of IP rights"
Innovation Income Deduction Definition Additional 85% tax deduction computed over the net income (royalties, capital gains, damages) related to patents, plant variety rights, orphan drug designations, market/data exclusivity rights for market authorization, and copyright protected software (developed under R&D program) Unused portion of the deduction can be carried forward indefinitely Medical DeviceCo Purchase price with"embedded" royalty Customers WebCo Notional license with "notional" royalty page 13
Innovation Income Deduction Conditions Net computation base Computation base for deduction IP revenue + historic R&D expenses (one-off or 7 year amortisation) IP related expenses (= overall expenses) incurred in the yearin which the IP income is earned page 14
Innovation Income Deduction Nexus-formula (link with "own" R&D activities) => tracking & tracing X Qualifying R&D expenses Overall R&D expenses Overall IP Aquisition Intra-group outsourcing Third party outsourcing Own R&D Non-qualifying up-lift 30% Qualifying As of filing (no longer required that IP right has been granted) => recapture if no grant Impact 5,1% effective tax rate for income related to IP page 15
Questions? Bird& Bird(Brussels Luxembourg) -TAX Brent Springael Tel : +32 (0)2 282 6042 brent.springael@twobirds.com