BELGIUM/ Corporate tax: New improved IP tax regime: the Innovation Income Deduction

On 20 February 2017, the Belgian Official Gazette published the law of 9 February 2017 introducing the Innovation Income Deduction. This is the improved Belgian IP tax regime, which has been modified in order to comply with international standards (BEPS and EU). This new tax regime enters into force with retroactive effect on 1 July 2016.

Compared to the previous Belgium IP tax regime, the scope of this new law has been broadened at both levels of the deductible income and the categories of exclusive rights that come into play:

Deductible income: (i) the rate has been increased to 85% of the “net” qualifying Innovation Income; (ii) the deduction applies not only to licence income but also to indemnities relating to IP, and realised capital gains; (iii) in compliance with international standards, the deduction applies to the net amount of qualifying income, limited to the portion of the company’s own R&D expenses (with an uplift of 30%; including expenses outsourced to unrelated parties) related to the total amount of R&D expenses;

IP-rights: this deduction does not apply to just patents and SPC’s (supplementary protection certificates for drugs). It also applies to computer programs, including derivative works of existing software (provided that certain R&D conditions are met), plant breeders’ rights, orphan drugs and even to some phytopharmaceutical products and medicinal products for human or veterinary use, and for which a data or market exclusivity is granted. This deduction can be claimed as soon as an application to register an IP right is filed (thus it applies even before the IP-right is granted, provided that an IP-right is actually granted afterwards).

Please do not hesitate to contact us for any additional information about this new improved IP tax regime. We can send a more detailed memo on this new regime on request.