incentives by xusuqin


									               Guide for mobile
               researchers                Belgium is investing a lot in
                                           stimulating Research and

               R&D Incentives from         Development. Several tax
                                          incentives are available for
                                       companies investing in R&D in
               a company point of          Belgium. The Belgian tax
                                        incentives do not only provide

               view                  benefits by lowering the tax cost for
                                       companies, but also include an
                                      actual cash saving (through a tax

                                     The purpose of this guide is to give
                                      a clear view on the tax incentives
                                            available in Belgium.

May 30, 2011
Table of content

1. Introduction
      A. Research and Development in Belgium
      B. R&D Incentives in Belgium

2. R&D grants
      A. General
      B. For companies
             -    Grants overview
             -    Specific Procedure
             -    Tax treatment
      C. For individuals
             -    Exemption from taxation
             -    Partial exemption from taxation
             -    No exemption from taxation

3. R&D payroll tax incentive
      A. System
      B. Benefits
      C. Qualifying Conditions
             -    For the employer
             -    For the employee
      D.   Procedure (application/evidence)
             -    Applying/claiming the R&D payroll tax incentive
             -    Documentation required as evidence
      E. Practical questions
      F. Links

                       Guide for mobile researchers - Belgium       2
4. R&D Tax Credit and Investment Deduction
      A.   Introduction
             -   R&D investment deduction
             -   R&D tax credit
             -   Comparison between the R&D investment deduction and the tax
      B.   Qualifying investments and exclusions
             -   Qualifying R&D investments
             -   R&D center
             -   No R&D center
      C.   Formalities
             -   Certificate from the Region
             -   Corporate tax return: form 275W/275U
             -   Credit

5. Special tax status for foreign executives
      A. System
      B. Benefits
             -   Tax-free allowances
             -   Travel exclusion
      C. Qualifying conditions
             -   For the employer
             -   For the employee
      D. Procedure – Application file

                      Guide for mobile researchers - Belgium   3
    1. Introduction
In Belgium a series of fiscal measures exist to stimulate research and innovation and to strengthen
the competitiveness of companies active in R&D:

   1. The R&D Grants to help companies to finance new R&D projects;

   2. The R&D Payroll Tax Incentive to reduce R&D personnel costs;

   3. The R&D Tax Credit to reduce the costs of the R&D investment;

   4. The Special tax Regime for foreign executives to attract highly skilled R&D professionals in

    A. Research and Development in Belgium

To define R&D, Belgium refers to the “Frascati” Manual, published by OECD defining what is R&D.

The Frascati Manual stipulates that: “Research and experimental development (R&D) comprise
creative work undertaken on a systematic basis in order to increase the stock of knowledge,
including knowledge of man, culture and society, and the use of this stock of knowledge to devise
new applications”.1

Based upon this definition, three activities are considered as R&D:

    1. Basic research: experimental or theoretical work undertaken primarily to acquire new
       knowledge of the underlying foundation of phenomena and observable facts, without any
       particular application or use in view.

    2. Applied research: original investigation undertaken in order to acquire new knowledge. It is
       however, directed primarily towards a specific practical aim or objective.

    3. Experimental development: systematic work, drawing on existing knowledge gained from
       research and/or practical experience, which is directed at producing new materials,
       products or devices, at installing new processes, systems and services, or at substantially
       improving those already produced or installed.

Further to the latter definitions, it is clear that R&D should not only be sought within R&D centers
but also outside such R&D centers, notably in departments or supporting R&D centers or working
in close relationship with the latter.

    B. R&D Incentives in Belgium

Having determined the activities qualifying as R&D activities, the taxpayer would be able to apply
the different R&D tax incentives:

1 Frascati Manual, Proposed standard practice for surveys on research and experimental development, p. 30,
   edition 2002.

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   − R&D Grants
   − R&D payroll tax incentive for R&D staff
   − Investment deduction/R&D tax credit
   − Special tax regime for foreign executives

There is also a special tax incentive for patent income allowing companies located in Belgium to
tax exempt 80% of the income generated by a patent or an improvement on a patent. We will not
develop the latter in the frame of this brochure but more information is available here.


                regime                R&D                        Tax credit/


                        Guide for mobile researchers - Belgium                 5
   2. R&D grants

   A. General

As a Federal State, Belgium is divided in 3 Regions: the Brussels-Capital, the Flemish and the
Walloon Regions.

Each Region stimulates investments in R&D on its own territory whereas the Federal State
stimulates the national R&D policy under the framework of its own competences. This allows a
more efficient and appropriate treatment of the requests introduced by the applicants but also a
specific focus on specific areas of development determined by the Regions.

The incentives can take the form of a loan, a grant, a recoverable advance, a reduction of social
contributions, etc.

- Concerning the Brussels-Capital Region, the competent authority is the Brussels Institute for
Research and Innovation -

- Concerning the Flemish Region, the relevant institution is the Agentschap voor Innovatie door
Wetenschap en Technologie -

- Concerning the Walloon Region, the relevant General Directorate is the DGO6 – Economie,
Emploi et Recherche (former DGTRE) -

The European Union also has a wide range of grants available. Those grants mainly aim at
fostering transnational R&D projects across Europe and beyond. European grants are partly
distributed via regional authorities.

Hereafter, we will present you several programs. For an in-depth overview of the different grants
available in Belgium, we suggest you to consult the web site of the corresponding Regions.

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    B. For companies

    - Grants overview

Most of Belgian regional grants should be requested before the start of an R&D project. Costs
incurred prior to the official request may not be considered as eligible.

The funding rates mentioned in this section are average intervention rates and may vary from year
to year. The exact funding rate to be applied on eligible costs will depend on the R&D activities
performed, the status of the beneficiary, and in some occasions when it applies, the structure of the
consortium. In addition, the eligible costs may also vary in function of several criteria, but the usual
eligible costs for R&D projects are personnel costs, consumables, depreciation of machinery and
equipment, general costs and overheads.

Some of the funding schemes presented have a bottom-up approach, while others will define
specific priority topics. In addition, some funding schemes are available continually throughout the
year, while the other ones will only be accessible during certain periods of the year, according to a
competitive call for proposals.

Grants and subsidies from the European Union

The Lisbon Strategy of March 20002 of the European Union sets the goal “to become the most
competitive and dynamic knowledge-based economy in the world capable of sustainable economic
growth with more and better jobs and greater social cohesion”. In addition, one of the goals
regarding R&D and innovation set in the Europe 2020 strategy for smart, sustainable and inclusive
growth is to invest (both public and private) 3% of the EU’s GDP in R&D and innovation. In the
scope of the ambitious goals of the EU, a broad range of funding programs have been developed
to support and stimulate R&D projects all over Europe.

Framework Programs for Research and Technological Development

The key programs developed by the European Union to reach the ambitious goal settings and
develop the European Research Area are the Framework Programs for Research and
Technological Development. The latest program set up is the 7 Framework Program (hereinafter
“FP7”) which covers the period 2007-2013. The funds available via such a Program aim to co-
finance a series of R&D projects all over Europe. The FP7 program is organised in four pillars
according to the four components of European Research:

    - Cooperation: this pillar is supporting the whole range of research activities carried out in
       trans-national cooperation. Collaborative research, joint technology initiatives and
       international cooperation are supported via this canal.

    - Ideas: such a pillar aims at enhancing the dynamism, creativity and excellence of European
        research at the frontier of knowledge in all scientific and technological fields. The scheme
        aims at improving and attracting the best researchers and industrial research investment in
        Europe by providing a European-wide funding structure for frontier research executed by
        individual teams.

2 Lisbon European Council 23 and 24 March 2000.

                          Guide for mobile researchers - Belgium                   7
    - People: the aim of this pillar is to support the quantitative and qualitative strengthening of
       human resources in research and technology via the so-called ‘Marie Curie Actions’. Those
       actions are described in the next heading.

    - Capacities: this part proposes financial support schemes in order to promote research
       infrastructures, research for the benefit of SMEs and the research potential of European

Funding rates vary from 50 to 100% of eligible costs according to the funding scheme, the legal
status of the participants involved and the type of activities performed (RTD, demonstration,
training and management activities).

The Commission has recently presented the next program which is named “Horizon 2020” and
which covers the period 2014-2020.

Marie Curie Actions

The Marie Curie Actions belong to the ‘People’ pillar of the FP7 program. Those actions can
financially support a series of trainings and mobility opportunities for researchers to help them
throughout their careers. Early-stage researchers, experienced researchers, as well as researchers
from outside the EU may qualify for grants under this program. The Marie Curie actions play a very
important role in the international mobility of researchers. Part of those actions can support joint
research & training projects implemented by public and private organizations focusing on the
transfer of knowledge. Those actions have a bottom-up approach, meaning that the participant
organization/researcher will not encounter any limitation for the selection of an R&D topic.

ERA-Net Scheme

The ERA-net scheme has the purpose to coordinate research projects carried out in each Member-
State in order to avoid a fragmentation of European R&D and to develop and implement joint
activities. This scheme is part of the FP7 program, and belongs to the Cooperation pillar. The ERA-
net scheme supports the creation of common funds among regional and national programs by
providing additional EU financial support for the implementation of joint calls for proposals. The
ERA-net scheme currently supports more than 100 ERA-net projects in a series of scientific and
technological fields. The applicable funding rates will vary according to the region/country in which
the participant organization is located and are usually the ones proposed by regional R&D


The mission of this intergovernmental initiative is to increase the competitiveness of European
Industry by supporting close to the market industrial R&D. Eureka consists of four different parts:

      (i) Eureka individual projects: This platform has the purpose to finance high-technology
          market oriented R&D projects which develop new and advanced technological products.
          Those projects must involve partners from at least two Eureka member countries.

      (ii) Eureka Clusters: The platform supports public-private cooperation in the long term by
           implementing strategically significant industrial initiatives (mainly in the field of ICT,
           energy and biotechnology).

      (iii) Eureka umbrellas: those are thematic networks focusing on specific strategic
            technologies and business sectors in order to facilitate the generation of EUREKA
            projects in their own target areas.

      (iv) The Eurostars program constitutes another part of the Eureka program especially
           focusing on small and medium enterprises. Any technological area having a civilian
           purpose and aiming at developing a new product, process or service can be supported by
           this R&D program.

                          Guide for mobile researchers - Belgium                 8
R&D Grants provided by the Regional Authorities

Flemish Region

The Government of Flanders provides a wide range of R&D incentives in the form of fellowships,
grants, subsidies, etc. Some of the projects are only available for small and medium enterprises.
The funding rates are determined as a percentage of the eligible costs of a project. Supported
projects are mainly the following:

    - Feasibility studies (funding rate of 40 to 50%, ceiling fixed at 50k €);

    - R&D projects for new innovative products (15% funding rate for Development activities, 40%
      for industrial research activities, with possible uplifts of 10 to 20 % for SMEs. The maximum
      grant amounts to 5 Mio €).

Other types of projects are the ICON projects simulating R&D between companies and universities
in one specific sector (ICT) by supporting up to 50 % of eligible costs.

The program “Baekeland-mandates” provides financial support for pre-doctoral researchers during
4 years. The pre-doctoral researchers will cooperate with private companies in a specific sector.

The IWT also supports specific sectors presenting a strategic importance for the Flanders region,
such as Flanders Drive, Flanders Food.

Walloon Region

The Walloon Region also provides a wide range of R&D incentives taking the form of fellowships,
grants, recoverable advances, etc. Some of the projects are only available for small and medium
enterprises. The funding rates are determined as a percentage of the eligible costs of a project.
The kinds of projects typically supported are the following:

    - Technical feasibility studies: such a support is only available to SMEs. The funding rates are
      ranging from 40 to 75% of eligible costs.

    - R&D projects: the support may take the form of a grant or of a recoverable advance
      according to the kind of activity performed and the existence of a partnership.

      The DGO6 also provides higher funding rates to R&D projects implemented according to a
      call for proposal from one of the 6 Competitiveness poles (the targeted sectors being
      aerospace, the food industry, mechanical engineering, heath, logistics, chemistry and
      sustainable materials).

The FIRST programs are comparable to the ‘Baekeland-mandates’ proposed by the IWT. These
funds are available for both domestic and foreign researchers. The Walloon Region provides in
particular a grant (the FIRST enterprise) for the recruitment of researchers to be trained at a public
research institution for the purpose of specific industrial research projects. The grant can cover up
to 70% of their wages.

Brussels Region

Innoviris, the institution coordinating the subsidy policy of the Brussels-Capital Region, provides
financial support for R&D projects. The funding rates are determined as a percentage of the eligible
costs of a project. Support to industrial research projects can be proposed via a grant ranging
between 50 and 70 %, or via a recoverable advance of 60-80%. For experimental development
projects, the grant amounts to 25-45% of eligible costs and the recoverable advance from 40-60%.

Some rather small projects called ‘Micro Projects’, are available for small and medium enterprises.
Innoviris also proposes grants for technical feasibility projects (ranging between 50-75% support

                          Guide for mobile researchers - Belgium                 9
with a ceiling at 125 k€) as well as for the costs relating to the protection of IP rights (from 35 to

    - Tax treatment

Belgian companies’ incomes are in principle subject to Belgian corporate income tax. The standard
corporate income tax rate in Belgium is 33.99%.

However, to support the initiatives of the Regions regarding R&D and innovation most of the
regional grants3 are tax exempted.

    C. For individuals

Public authorities may attribute R&D grants and subsidies directly to researchers cooperating in
R&D projects. The financial aid has to cover basically the labour cost and the necessary working
capital of the researcher.

    - Exemption from taxation

In case the subsidy is attributed by one of the official institutions that are recognized for it.

The subsidy needs to be attributed for a special performance on the field of scientific research
allowing the beneficiary to continue with the research on an individual level (without becoming
dependent of the person attributing the subsidy). There should be no direct consideration for the

    - Partial exemption from taxation

In case the subsidy is not attributed by one of the recognized institutions, a partial exemption is
available in case there is no consideration requested for the subsidy and the person attributing the
subsidy is a non-profit organization or a public organization.

The partial exemption amounts to 2.500€ (to be indexed e.g. for income year 2011 to 3.530€). In
case the subsidy is paid over time, the exemption applies for the first two periods of 12 months
(irrespective whether or not this period of 12 months concurs with the calendar year).

The part above the tax-free threshold will considered as miscellaneous income and will become
taxable at 16,5% (to be increased with local taxes). A salary form 281.30 will be issued reporting
the amount the individual has received.

No Belgian social security will be due on the received amount.

    - No exemption from taxation

In case grants and/or subsidies are attributed in consideration for services rendered, they are
considered as remuneration and will be subject to income tax and social security applicable to
ordinary remuneration.

As such, any subsidy attributed by a company/institution with which the individual has concluded
an employment agreement will be considered as professional income.

3 Art. 193bis, 193ter Belgian Income Tax Code 1992

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Both employer’s (+/- 35% on the gross amount) and employee’s (13,07% on the gross amount)
social security contributions will be due. In addition the progressive tax rates (up to 50% to be
increased with local taxes) will be applicable on the amount after deduction of the employee’s
social security contributions.

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     3. R&D Payroll tax incentive

     A. System

Companies employing researchers need to withhold advance payments as withholding tax from the
remuneration paid to its researchers according to the applicable scales as determined by law. The
company then needs to transfer the amount withheld to the tax authorities.

The measure foresees that the employers of R&D employees are exempt to transfer 75% of the
withholding tax deducted to the Belgian treasury as of January 1, 20094. This provides the
employer with a personnel cost reduction between 15 and 20%.

     B. Benefits

    • There are additional financial possibilities for the employer as the benefit will go to the
      employer. It does not impact the payroll and related net payment of the individual concerned;
    • It is a ‘Cash-in-hand’ benefit: direct availability of the financial resources;
    • Private companies have discretionary power to use the savings realized in the best
      economical way;
    • It is possible to combine the benefit with special expatriate tax regime (see infra).

     C. Qualifying conditions

      - For the employer

The R&D payroll tax incentive can only be applied in case of researchers:

     • Employed by universities, higher schools, the “National Fund for Scientific Research” and the
       “Research Foundation – Flanders” – see Link NL – Link FR for more info

     • Employed by registered scientific institutions – see Link NL – Link FR for more info

     • Appointed by companies to research projects conducted pursuant to partnership agreements
       concluded with institutions mentioned in the previous two indents

     • Employed by “Young Innovative Companies” – see Link NL – Link FR for more info

     • Employed by private companies, but with specific diploma requirement

4 Note that this percentage has been lower in the past. See Link for further details.

                                Guide for mobile researchers - Belgium                  12
      - For the employee

R&D activities

The R&D payroll tax incentive can only be applied for researchers, meaning that the individuals
must perform R&D activities. The latter condition should be reviewed periodically by the employer
in order to avoid claiming the exemption where it is not applicable.

Reference is made to the Frascati manual of the OECD in which R&D is defined - see Link for the
full document.

Diploma requirement

Belgian tax legislation foresees that in order for private companies to be able to benefit from the
R&D payroll tax incentive, its researchers should meet specific diploma requirements5. The law
does not explicitly mention this requirement for the researchers employed by the other categories
of employers.

Researchers employed in private companies should have one of the following diplomas:

     • A doctorate degree in applied sciences, exact sciences, medical sciences, veterinary
          medical science;
     • A degree of civil engineer;

     • A specific master degree in science.

     D. Procedure

      - Applying/claiming the R&D payroll tax incentive

If all qualifying conditions have been met, both in the hands of the employer as in the hands of the
employee, it is up to the employer to apply the R&D payroll tax incentive in the monthly payroll.

This can be done through immediate implementation in the payroll for the current year.

The company has to identify for each individual if they are effectively employed in an R&D function
and determine the percentage of effective time that is dedicated by these employees to the R&D
activities. It is not necessary that an employee is fully employed in R&D, a part-time employment
also qualifies for the exemption. In the latter case, only the corresponding part of the remuneration
should be taken into account.

Immediate implementation in the payroll

The employer can immediately apply the wage tax exemption in the payroll by filing 2 withholding
tax returns (returns 274), of which one includes all the compensation and withholding tax for all
employees and one relates to the compensation that is paid or attributed to employees that meet
the conditions for the partial exemption.

5 Article 275/3 § 2,2° ITC 1992.

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To the extent that a company would have already transferred the withholding tax to the State
Treasury and has additional qualifying employees and/or employees spending more time on R&D
projects than foreseen, an electronic regularization can be done for any excessive withholding tax
paid. – see Link.

    - Documentation required as evidence

When claiming the R&D payroll tax incentive, a documented file should be kept at the premises of
the employing company which should be made available for the tax officer upon request.

The latter documentation would include:
    • Identification of the employer
    • Description of the R&D activities
    • For all eligible employees:
            o Identification and national number
            o Date of the start of the employment (and possibly end of employment)
            o Copy of the employment contract
            o Copy of the degree
            o Individual account for the income year concerned
            o Evidence of the time spent by the individual on eligible R&D activities
    • Total amount of remuneration paid and withholding tax deducted

    E. Practical questions

Can the R&D payroll tax incentive be applied for self-employed individuals and directors?

No, the incentive can only be applied for qualifying individuals in an employee function.

How to determine time spent on R&D in practice?

The company has to identify for each individual if they are effectively employed in an R&D function
and determine the percentage of effective time that is dedicated by the employees to R&D

In order to determine the percentage of effective time dedicated to R&D activities, a correct and
accurate time management of the R&D activities is required.

It is recommended to implement a “time reporting” system which automatically generates the time
that is spent by each employee in R&D activities. This also allows the employer to provide the
necessary information to the tax authorities upon their request.

Can the R&D payroll incentive be combined with the Belgian special tax regime for foreign

Yes, be it that the basis on which the exemption can be applied should be the withholding tax
calculated with application of the tax-free allowances and travel exclusion.

For a more detailed explanation on the special tax regime and its benefits see below.

In private companies, do foreign diplomas qualify as well?

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An employee in the possession of a foreign diploma can qualify if the diploma has a value
equivalent to one of the Belgian diplomas referred to in the community decrees (see above).

   F. Links

   − Foreign direct investment in business R&D in Belgium in comparison with other EU Member
     States statistical overview and policy making - Link

   − Collective Research Centers: A Study on R&D and Technology Transfer Involvement - Link

   − De instellingen en het beleid inzake Wetenschap, Technologie en Innovatie in België - Link

   − De O&O- dynamiek van de ondernemingen in België - Link

   − Innovatief België - Link

                        Guide for mobile researchers - Belgium              15
    4. R&D Tax Credit and Investment Deduction
The following chapter will provide some information on how to reduce the costs of R&D investment
via tax.

When a company is investing in R&D in Belgium, it will be allowed to benefit from a super
deduction or a tax credit provided the investment is used by the company for its professional
activity. The investment should not necessarily be located in Belgium but it should be used by the
company for its activity in Belgium.

    A. Introduction

The investors should make a choice between the R&D investment deduction and the R&D tax
credit. In both case, the investment costs should be reduced by 4 to 7%.

    - R&D investment deduction

The R&D investment deduction can be calculated on either the acquisition value or on the yearly
amortizations of the R&D investment:

    • The one-shot investment deduction is calculated as a percentage of the acquisition value of
      the qualifying asset. For tax year 2013 the one-shot deduction amounts to 15,5% of the
      acquisition value. The one-shot investment deduction also exists for patents (15,5%), and for
      energy-saving investments (15,5%).

    • The spread investment deduction is calculated as a percentage of the annual amortization
      applied to the qualifying asset. For tax year 2013 the spread deduction amounts to 22,5% of
      the annual amortization of the asset.

The investment deduction can be carried forward. There is a maximum amount that can be used
from this carried forward investment deduction per calendar year. The deduction of the carried
forward investment deduction can per taxable year, not be higher than 620.000 € (to be indexed
e.g. for TY2011 to 876.620€) or, if the total amount of carried forward investment deduction is
higher than 2.480.000 € (to be indexed e.g. for TY2011 to 3.506.470 €) at the end of the previous
tax year, maximum 25% of that total amount.

    - R&D tax credit

The mechanism of the tax credit is similar to the investment deduction. However, the R&D tax
credit is refunded provided it has not been used within 5 years after the investment. From an
accounting point of view, the R&D tax credit should be considered as “above the line” credit.

The company can opt for a non-recurring (single) R&D tax credit or a spread R&D tax credit:

    • The single R&D tax credit is computed as 33,99% of 15,5% of the acquisition value of the
      qualifying investment for tax year 2013;

    • The spread R&D tax credit is computed as 33,99% of 22,5% on the annual amortization
      allowances related to the qualifying investments for tax year 2013.

If the R&D tax credit has not been used by the company against taxable income within 5 years, the
amount of tax credit is refunded to the Belgian State.

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    - Comparison between the R&D investment deduction and the tax credit

Both tax incentives have the same conditions in terms of investment qualifying, reporting
obligations, ... . However, the tax credit has two important features which make it in some occasion
a more attractive incentive than the investment deduction:

    • The tax credit is refundable after 5 years, which is particularly beneficial to companies in a
      tax loss position because it offers a “cash-in-hand” benefit.

    • In IFRS and US GAAP, there are good arguments to defend that the tax credit should be
      booked as a decrease of costs or increase in earnings, as opposed to a reduction in the tax

The company applying for one of these incentives is making an irreversible choice.

    B. Qualifying investments and exclusions

    - Qualifying R&D investments

There are 3 types of qualifying investments:

      • Tangible fixed assets;

      • Acquired Intangible fixed assets (patent, licence, ...);

      • In-house developed intangible fixed assets (capitalized R&D development costs).

In order to benefit of the R&D investment tax incentives (tax deduction or tax credit), the following
conditions should be met:

    • The investment must be new.

    • The investment should be recorded as a fixed asset (tangible/intangible) on the company’s
      Belgian GAAP balance sheet and should be depreciated over a minimum period of 3 years.

    • The investment is exclusively used for professional purposes in Belgium by the company.

    • The assets should be kept and used for the R&D activities during their entire depreciation

    • The assets should not be disposed by the company to a third party except if the latter would
      also benefit from the R&D investment tax deduction/credit.

    - R&D center

For the investments realized through/within an R&D center, it is usually easier to qualify as R&D

A research center is:
    • A separate branch of activity. The research center has to hold a separate set of accounts in
      order to demonstrate a clear separation between the operational activity and the research
    • An independent technical entity able to operate autonomously with its own resources:
      people, facilities, subcontractors, .
    • R&D investments are only eligible to the extent that they do not exceed the normal limit
      necessary for the operation of the R&D center.

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When a company is able to demonstrate that it has an operational research center, all the
investments necessary for the activity of the latter would qualify for the R&D investment tax
deduction/ credit. For example, if the company decides to capitalize all its R&D personnel costs, it
will benefit from the tax incentives on the latter.
    -    No R&D center6

The R&D investments realized by companies outside of the R&D center would also qualify. This
includes for example:

    a. Specific innovative tangible investments allocated to the development/ improvement of new
       production techniques, new production processes, new equipment, new products or raw
       material, the development of prototypes and the purchase of special measurement

    b. Tangible and intangible investments which are not purely for research but which are
       necessary for the realization of a scientific program that contributes to technological

    C. Formalities

There are several formalities to benefit from the R&D tax investment deduction/credit.

    - Certificate from the Region
In order to claim the R&D tax deduction or credit, the company needs to obtain a certificate from
             8         9
the (Flemish , Walloon or Brussels) Region in which the investment is located. The application for
the certificate should provide evidence that the R&D investments are made to develop
products/services/technologies that are:

    • Innovative; and
    • Have no negative environmental impact or, if there is an environmental impact, that the
      company has taken the necessary measures to limit such impact.

If the investments are realized outside of Belgium but still considered as an asset of a Belgian
Company, then the certificate should be requested to the Region where the social seat of the
Belgian Company is located.

The certificate issued by the Regions should be kept by the company to be made available upon
first demand in case of a tax audit.

6 Article 48 RD/ITC92

7 Art. 81 & 82 RD/ITC92


9 ; the general site is ; the list containing the qualifying investments ; the manual
   published by the Walloon authorities on .

Link to the required form:

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   - Corporate tax return: form 275W/275U

A specific tax form should be annexed to the corporate tax return, including information on
acquisition date, value, denomination and useful lifetime of the investment:

   • For the R&D investment deduction: enclosure of tax form “275U” to the corporate tax return;
   • For R&D tax credit: enclosure of tax form “275W” to the corporate tax return.

Moreover, the following conditions must be met:

   • A separate file must be kept by the company for each type of asset for which the investment
     deduction/ tax credit is claimed.
   • Supporting documents could be added to the tax return in order to substantiate the R&D tax
     claim; and
   • As discussed before, the Regional certificate has to be issued by the regional authorities
     confirming the innovative and environmental-friendly nature of the R&D.

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    5. Special tax status for foreign executives

    A. System

For Belgian individual income tax purposes, foreign citizens coming to Belgium can be considered
belonging to one of the following three categories:
   • Belgian residents
   • Ordinary non-residents
   • Non-residents qualifying for the special tax status for foreign executives

The special tax status implies a fictitious non-residency status and is an advantageous taxation
system for foreigners coming to Belgium -see Link for the administrative circular installing the

A foreign executive under the special tax status will be taxable on his worldwide professional
income (whether this income is paid in Belgium or not) and on other Belgian source income.
However, he will be allowed to exclude from his worldwide earned income:
   • the “tax-free allowances”
   • the “travel exclusion”

Consequently, the advantage of the system lies in the fact that two additional deductions from
earned income are allowed in comparison to Belgian residents and ordinary non-residents, before
the normal progressive income tax rates are applied.

    B. Benefits

The employee will be allowed to exclude the following elements from his worldwide earned income:

    - Tax-free allowances

Expenses proper to the employer

Tax free allowances are allowances considered to represent the reimbursement of costs incurred
on behalf of the employer during the assignment to Belgium in excess of what the expatriate would
have incurred in his home country.

According to administrative legislation (Link – 142/3), the following expenses can be considered:
   • Non-repetitive expenses
         o Moving costs in the year of arrival and departure;
         o Costs of setting up a household in Belgium.

   • Repetitive expenses
         o Cost of living allowance (Cola) – difference in cost of living between Belgium and
           home country;
         o Housing differential (HD) – difference in cost of housing between Belgium and home
         o Tax equalization (TE) – difference in tax cost between Belgium and home country;
         o Home leave;
         o School fees for primary or secondary level.

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These expenses are determined on the basis of actual costs made, except for the Cola, the HD
and TE, that can be computed on the basis of an internationally applied cost reimbursement10 (if
applied for with the tax authorities) or, in the absence thereof, on the basis of the Technical Note
set forth by the Belgian tax authorities.

   Annual limitation: EUR 11.250/EUR 29.750

The tax-free allowances are limited to maximum:
    • EUR 11.250 for executives in operating companies;
    • EUR 29.750 for executives in recognized headquarters or research and development
However, the non-repetitive expenses and the specified school fees are not to be included in the
relevant ceiling.

   Application of the higher limitation of EUR 29.750
The maximum amount of € 29.750 can be granted to expatriates who have a coordinating function
within recognized headquarters or who have a research and development function within a
recognized R&D center.

         - Recognized headquarters: exclusive objective is controlling or coordinating the activities
           or operations of companies and/or branches which are part of an international group of
         - R&D centers: Laboratories and scientific research centers with activities that exclusively
           consist of scientific or technical research in every possible field.

The application of the higher limit should be requested in an application file and is therefore subject
to an official approval of the Belgian tax authorities.

After analysis of the different departments and job descriptions of the expat population, the Belgian
tax authorities can recognize a specific department within a company as qualifying for the higher
limit of EUR 29.750.

- Travel exclusion

In addition, the income related to foreign activities will be excluded from the total income on the
basis of business days spent abroad over total working days. For the general principles on how the
travel exclusion percentage is determined can be found in the circular letter.

The travel exclusion is within the expat status an important element to lower the taxable basis. It is
obvious that the tax authorities upon a potential audit will thoroughly review the travel details to
avoid abuses. See this link for the documents accepted as proof of foreign business days.

    C. Qualifying conditions

- For the employer

The Belgian branch or company employing expatriates must be part of an international group or at
least have presence abroad:
    • Belgian Enterprise or Belgian branch of foreign company;
    • Office of control and coordination;

10 Several specialized companies can provide the international data and the corresponding cost amounts for
   international mobile employees.

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    • Laboratories and scientific research centers (international character not necessary).

- For the employee

The special tax regime applies to executives who:
        • possess a foreign nationality;
        • have special skills and knowledge which is hard to find on the Belgian market;
        • work in Belgium because:
           o they have been posted to Belgium by a foreign enterprise to work here temporarily
             either in one or more establishments of this enterprise;
           o they have been posted to the country by a foreign enterprise which is part of an
             international group, to work here temporarily in one or more Belgian companies
             forming part of the said group;
           o they have been recruited directly from abroad by a Belgian company which is a branch
             or subsidiary of a foreign company or forms part of international group to work
             temporarily in the Belgian company.

In order to be granted the special tax status, the executive must not be found to have established
his domicile or the center of his personal and economic interest in Belgium. This must be based on
a whole of precise and consistent elements highlighting the temporary nature of the presence in
Belgium – see Link – 139/9 for a summary of these elements.

    D. Procedure – Application file

To obtain the application of the special tax regime, the Belgian company which employs the
executive as well as the executive himself must submit a request to the Foreigners’ Tax Service.

The employee application file should demonstrate that the individual has maintained the center of
his economic interest outside Belgium and should also contain details as to the method of
compensation and the determination of the tax-free allowances. It should also contain a whole of
precise and consistent elements highlighting the temporary nature of the presence in Belgium.

The employer request should demonstrate that the qualifying conditions are fulfilled in the hands of
the employer.

The requests should be submitted before the end of the sixth month as of the first day of the month
following the start of the assignment in Belgium - see link.

There is no fixed number of years during which the executive may qualify for the special tax status.
However, the expat status may, in principle, be reviewed annually.

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