Organisations, employing research staff in Belgium, can benefit from a substantial tax exemption. The exemption mechanism is linked to the monthly salary withholding tax (PAYE tax), which is due on the salaries of those staff members, who qualify for the regime.
More specifically, the employer is allowed to keep part of the withholding tax, which was deducted from the salaries and is not required to remit these funds to the Belgian revenue services. The basic requirements for the exemption are:
- the type of education (diploma) and education level of the staff members
- employment of the staff members on a qualifying research project
There is no overall ceiling to the exemption, which implies that substantial benefits can be obtained. In the past, the system was very informal and no specific procedure existed for employers in order to initiate the exemption. This system not only resulted in a risk for the authorities for improper use of the exemption, but in addition put organisations at risk in case discussions would at some moment arise on the use of the exemption.
From July 2013 onwards, a procedure has been set up for companies in order to qualify for the exemption. In addition, the exemption amount has been increased from 75% (of the withholding tax amount of the qualifying employees) to 80%.
Statutory definitions will be introduced in 2014 in order to better specify the nature of those research projects, for which exemption can be obtained. The following resarch activities qualify:
- Fundamental research: experimental or theoretical work, performed in order to acquire new knowledge or understanding of phenomena and of observable facts, without direct application of such knowledge in commercial, industrial or technical products or processes.
- Industrial research: research in order to acquire knowledge and skills for the development of new products, processes or services or for significantly improving them.
- Experimental development: the acquisition, combination and use of existing scientific, technological, business or other knowledge in order to develop improved products, processes or services.
Contrary to the past, from 1 January 2014 onwards, it will be required to first register the project with the Belgian Federal Science Department. There is a transition regime for existing projects, which are also to be registered (and which have to meet the new definitions) up to 1 January 2015.
An organisation can now also request an up front advice (ruling) with the Belgian Federal Science Department relating to the qualification of it’s project for the tax exemption.