1 etg gothenburg 2010 : belgian tax incentives for r&d and ip
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ETG Gothenburg 2010 :ETG Gothenburg 2010 :Belgian tax incentives for R&D and IP Belgian tax incentives for R&D and IP
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PeopleWage withholding tax exemptionInnovation premiumExpatriate tax regime
Belgian R & D Centre
Favorable transfer pricing rulings
Activities Investments
Patents
Investment deductionR&D tax creditAccelerated depreciationTax exoneration for regional grants
Patent Income Deduction
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1. Investment deduction / tax credit
• Increased investment deduction or tax credit applies to investments in R&D and patents.
• R&D has to be related to new products and/or future technologies which have no negative effects on the environment or which try to minimize these negative effects.
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1. Investment deduction / tax credit
• The investment deduction or tax credit applies to assets which are:– Acquired as new assets or established within the
company;
– Used in Belgium to exert the professional activity;
– Depreciable over at least 3 years.
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1. Investment deduction / tax credit
• Since tax year 2007, companies have the option to choose for a tax credit instead of the increased ID for R&D and patents.
• The choice is irrevocable.
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1. Investment deduction / tax credit
• The tax credit is deductable of the corporation tax which has to be paid.
• The tax credit is refundable when it has not been deducted for 5 subsequent years (in case of a lack of taxable income).
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1. Investment deduction / tax credit
• Rates increased ID (tax year 2011):– ‘one shot’ deduction: 13,5% of acquisition value;
– ‘spread’ deduction: 20,50% of annual amortization.
• Rates tax credit (tax year 2011):– ‘one-shot’ credit: 13,5% x 33,99% of the acquisition value;
– ‘spread’ credit: 20,5% x 33,99% of the annual amortization.
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2. Wage withholding tax exemption
• The employer retains the withholding tax on the remuneration of the researcher, but 75% of the retained tax must not be paid to the tax authorities.
• The employee can credit 100% of the withholding tax against final tax liability
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2. Wage withholding tax exemption
• Exemption for:– Universities, colleges, certain funds for R&D and
recognized institutions for R&D;– Companies which have concluded a partnership with
the aforementioned institutions;– Young innovative companies;
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2. Wage withholding tax exemption
• Young Innovative Companies
= Small companies which:– Spend an amount to R&D, at least 15% of the total cost
of the preceding taxable year;
– Exist less than 10 years;
– Are founded as a new company and are not the result of a merger, restructuring, acquisition or expansion.
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2. Wage withholding tax exemption
• Small companies can not exceed more than 1 of the following criteria:– Employees (average): 50;
– Turnover: 7.300.000 EUR (excl VAT);
– Total assets: 3.650.000 EUR
• > 100 employees (average) = no small company
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3. Accelerated depreciation
• Tax depreciation on R&D: 3 years instead of 5 years (straight line method)
• In-house created R&D does not have to be capitalized.
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4. Tax exoneration for regional grants
• Exoneration for regional grants in favour of R&D.
• Subsidized assets can not be transferred during a period of 3 years.
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5. Tax deduction for patent income
• Tax deduction equal to 80% of the royalties received from qualifying patents.
• Encourage companies to invest in R&D for their own account and to exploit those inventions their self
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5. Tax deduction for patent income
• Beneficiaries:– Belgian companies;
– Belgian branches.
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5. Tax deduction for patent income
• Qualifying patents :– Income from patented inventions and supplementary protection certificates;
– Which have not been used by the tax payer, a licensee or a related party for sales of goods and services before January 1, 2007;
– Owned by the tax payer resulting from own research and development activities in research centers in Belgium / abroad or;
– Acquired by the Belgian company or establishment via purchase, contribution or under a license agreement if the patents are further developed by the tax payer.
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5. Tax deduction for patent income
• Research center:– The beneficiary must have a research center under the form
of a separate division or a branch of activities (substance)
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5. Tax deduction for patent income• Qualifying income:
– Patent income that is taxable in Belgium
– Two types of income• License income whether periodic or fixed
• Income included in the selling price of goods and services of the company
– Excluded: income from the transfer of ownership of patents
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5. Tax deduction for patent income
• Tax deduction:– 80% of the income received from patents– Effective tax rate = 20% x 33,99% or 6,8%– Deducted from all types of taxable income– No carry forward or carry back
• Anti-abuse provisions
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6. Belgian expatriate tax regime
• Expatriate = special tax status– Employment in Belgium in qualifying company;
– Employment of temporary nature;
– Non-resident of Belgium;
– Foreign researchers and other specialized foreign staff.
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6. Belgian expatriate tax regimea) Expatriate allowances or expense reimbursements are tax-free:
– Tax equalization;
– Housing allowance;
– Cost of living allowance;
– Home leave allowance;
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6. Belgian expatriate tax regime• Non-repetitive vs. repetitive expenses:
– Non-repetitive: tax – free;– Repetitive expenses: max. € 29.750 / year for staff employed by
research centers.
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6. Belgian expatriate tax regime
b) Travel exclusion:– Remuneration relating to days worked outside of Belgium is not
taxable;
– Excluded remuneration is calculated according to presence rules provided by Belgian tax authorities.
c) Social security contributions:– Expatriate allowances / expense reimbursements are not subject to
Belgian employer and employee social security contributions
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7. Other
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The Intellectual Property Tax Law in The Intellectual Property Tax Law in Luxembourg ( art. 50 bis )Luxembourg ( art. 50 bis )
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Intellectual Property Income From :
• Copyright on software• Patent• Domain name• Trademark• Design or model
How to become a owner ?
• Developed by the company
• By acquisition
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Conditions to be qualify as an “IP” :
• Acquisition after December 31, 2007• Expenses must be recorded as an asset• IP can’t be acquired by an “affiliated company”
• What’s an affiliated company :
A company X is considered as an affiliated company of a company Y if :
– X directly holds a participation of 10 % in the share capital of Y ;
– Y directly holds a participation of 10 % in the capital of X;– 10% or more of share capital of X and Y are directly held by
the same company.
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Regime applicable to the “IP”:
• Tax exempt for 80 % of their net positive revenue
AND
• Deduction’s are possible on the income with :
- Direct expenses
- Yearly amortization
- Depreciation
Example of “IP” :
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« IP » revenues : 10.000,00 €Direct expenses : 3.000,00 €Amortization : 250,00 €
NET « IP » revenue : 6.750,00 €
« IP » Taxable : 1.350,00 €
Example : with only Royalties
Effective tax-rate 5,7 % ( 20 % x 28,59 % )
Example : with mixed Income
Net Result on the IP 180 000,00 Only 20 % taxable 36 000,00 Tax on the IP ( 28,59 % ) 10 292,40
Normal result 115 000,00 Tax on the result ( 28,59 % ) 32 878,50
TOTAL TAX DUE 43 170,90
Tax rate for this case : 14,60 %
Gross Income 600 000,00
Income received from IP 450 000,00 Other Income 150 000,00
Total charges 305 000,00
Fees linked with IP 270 000,00 Other fees 35 000,00
Profit of the Year 295 000,00
Balance Sheef of Company X
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• Tax deductions on the new yearly investments of amortizable assets except buildings & agricultural livestock.
• IP is exempted from the wealth tax• No liquidation tax on companies
More benefits in Luxembourg :
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• Large number of treaties to receive an exemption of withholding taxes at source
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• Support to finance an R&D Project : – Subsidies when investment project is financed
by equity
– Between 25 % and 100 % of investments covered
– To constitute your file you can be helped by
» www.luxinnovation.lu
– Your file must be sent to the Ministry of the small and Medium-Sized Business :
» www.mcm.public.lu
– Interest-rate subsidies when the investment project is financed through a bank loan *
– Financement must be done with Société Nationale de Crédit et d'Investissement (SNCI),
» www.snci.lu– Rate of 2,5 % until 25 % of the investment
(*) Suspended due to the economic crisis
• Conditions to have the support :
– Must be asked at the latest two years after the investment
– Has to be used in normal terms of amortization or not before expiration of the 10 years
Appendix : List of treaties Country Date of the tax treaty Effect from Article %
Armenia C 23.06.2009 1.1.2011 Art.12 -Austria C 18.10.1962 1.1.1961 Art.9 0 or 10Azerbaijan C 16.06.2006 1.1.2010 Art.12 5 or 10Belgium C 01.01.1972 1.1.2005 Art.12 - Brazil C 08.11.1978 1.1.1981 Art.12 15 or 25Bulgaria C 27.01.1992 1.1.1994 Art.12 5Canada C 10.09.1999 1.1.2001 Art.12 0 or 10China C 12.03.1994 1.1.1996 Art.12 6 or 10Czech Republic C 18.03.1991 1.1.1993 Art.12 0 or 10Denmark C 17.11.1980 1.1.1979 Art.12 - Estonia C 23.05.2006 1.1.2008 Art.12 5 or 10Finland C 01.03.1982 1.1.1980 Art.12 0 or 5France C 01.04.1958 1.1.1957 Art.10 - Georgia C 15.10.2007 1.1.2010 Art.12 - Germany C 23.08.1958 1.1.1957 Art. 15 5Greece C 22.11.1991 1.1.1996 Art.12 5 or 7Hong-Kong C 02.11.2007 1.1.2008 Art.12 3Hungary C 15.01.1990 1.1.1990 Art.12 - Iceland C 04.10.1999 1.1.2002 Art.12 -
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Country Date of the tax treaty Effect from Article %India C 02.06.2008 1.1.2010 Art.12 10Indonesia C 14.01.1993 1.1.1995 Art.12 12,5Ireland C 14.01.1972 1.1.1968 Art.11 - Israel C 13.12.2004 1.1.2004 Art.12 5Italy C 03.06.1981 1.1.1978 Art.12 10Japan C 05.03.1992 1.1.1993 Art.12 10Latvia C 14.06.2004 1.1.2007 Art.12 5 or 10Lithuania C 22.11.2004 1.1.2007 Art.12 5 or 10Malaysia C 21.11.2002 1.1.2005 Art.12 8Malta C 29.04.1994 1.1.1996 Art.12 10Maurice C 15.02.1995 1.1.1996 Art.12 - Mexico C 07.02.2001 1.1.2002 Art.12 10Moldavia C 11.07.2007 1.1.2010 Art.12 5Monaco C 27.07.2010 1.1.2011 Art.12 - Mongolia C 05.06.1998 1.1.2004 Art.12 5Morocco C 19.12.1980 1.1.1984 Art.12 10Norway C 06.05.1983 1.1.1986 Art.12 - Poland C 14.06.1995 1.1.1997 Art.12 10Portugal C 25.05.1999 1.1.2001 Art.12 10Qatar C 03.07.2009 1.1.2011 Art.12 - Rumania C 14.12.1993 1.1.1996 Art.12 10
Country Date of the tax treaty Effect from Article % France C 01.04.1958 1.1.1957 Art.10 - Géorgie C 15.10.2007 1.1.2010 Art.12 - Grèce C 22.11.1991 1.1.1996 Art.12 5 or 7Hong Kong C 02.11.2007 1.1.2008 Art.12 3Hongrie C 15.01.1990 1.1.1990 Art.12 - Inde C 02.06.2008 1.1.2010 Art.12 10Indonésie C 14.01.1993 1.1.1995 Art.12 12,5Irlande C 14.01.1972 1.1.1968 Art.11 - Islande C 04.10.1999 1.1.2002 Art.12 - Israël C 13.12.2004 1.1.2004 Art.12 5Italie C 03.06.1981 1.1.1978 Art.12 10Japon C 05.03.1992 1.1.1993 Art.12 10Lettonie C 14.06.2004 1.1.2007 Art.12 5 or 10Lituanie C 22.11.2004 1.1.2007 Art.12 5 or 10Malaisie C 21.11.2002 1.1.2005 Art.12 8Malte C 29.04.1994 1.1.1996 Art.12 10Maroc C 19.12.1980 1.1.1984 Art.12 10
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Country Date of the tax treaty Effect from Article %Russia C 28.06.1993 1.1.1998 Art.12 - San Marino C 21.12.2006 1.1.2007 Art.12 - Singapore C 06.03.1993 1.1.1996 Art.12 10Slovak republic C 18.03.1991 1.1.1993 Art.12 0 or 10Slovenia C 02.04.2001 1.1.2003 Art.12 5South Korea C 07.11.1984 1.1.1984 Art.12 10 or 15South of Africa C 23.11.1998 1.1.2001 Art. 12 - Spain C 03.06.1986 1.1.1988 Art.12 10Sweden C 14.10.1996 1.1.1999 Art.12 - Switzerland(Swiss) C 21.01.1993 1.1.1994 Art.12 - The Netherlands C 08.05.1968 1.1.1967 Art.12 - Thailand C 07.05.1996 1.1.1999 Art.12 15Trinidad and Tobago C 07.05.2001 1.1.2004 Art.12 10Tunisia C 27.03.1996 1.1.2000 Art.12 12Turkey C 09.06.2003 1.1.2006 Art.12 10United Arab Emirates C 20.11.2005 1.1.2010 Art.12 - United Kingdom C 24.05.1967 1.1.1966 Art.12 5United States of America C 03.04.1996 1.1.2001 Art.13 - Uzbekistan C 02.07.1997 1.1.2001 Art.12 5Vietnam C 04.03.1996 1.1.1996 Art.12 10