The new Innovation Deduction: an Opportunity for IT companies

On February 2nd, 2017, The Belgian Parliament has approved the law introducing a tax "innovation income deduction".

This deduction was introduced retro-active as of July 1st, 2016 and can therefore already be applied for the past fiscal year.

The income eligible for the deduction must relate to intellectual property rights of :

1/ patents or supplementary protection certificates;

2/ breeders' rights

3/ orphan drugs

4/ data and market exclusivity

5/ copyrighted software

t is this last category that offers interesting perspectives for the many IT companies. Also software developed for the improvement of internal business and production processes may be eligible for the deduction.

The deduction amounts to 85% of the qualifying net income, but surely there are some important conditions to consider:

  • The software should be the result of a research or development project as defined for the exemption for withholding tax on wages;
  • The software has produced no income before July 1st, 2016;
  • The deduction is limited if the software was only partially developed by the company.

Furthermore, for the application of this tax deduction, it is crucial to be able to submit corresponding evidence : convincing data and related documentation, both in terms of income and expenditure.

Of course, our office can guide you through these administrative obligations.

Don't miss this opportunity!