On 29 February 2024, a draft law was submitted covering (amongst others) the investment deduction regime.
The proposed changes to the investment deduction included in the preliminary draft law have largely been retained in the draft law submitted by the Belgian government to parliament (see also our newsflash of 14 November 2023). The following items were adjusted compared to the preliminary draft:
- The new regime as well as the correction related to the (partial) professional withholding tax exemption regime to determine the investment deduction basis would be applicable for investments made as of 1 January 2025.
- The increased “thematic” investment deduction would not be applicable by companies in difficulty or by a company for which a recovery order is outstanding following a decision of the Commission declaring aid granted by Belgium unlawful and incompatible with the internal market.
- Moreover, the increased thematic deduction could only be applied to fixed assets for which no regional aid is requested (exceptions to be determined by the King).
On 22 March 2024, a number of amendments were proposed with regard to the draft law containing various tax provisions (which includes the proposed changes to the investment deduction regime), including a number of amendments in relation to the innovation income deduction (“IID”) regime.
According to the draft law, taxpayers would have the option not to offset part or the full amount of IID (both the IID of the year itself and the amount carried forward) against the taxable basis but to convert it into a non-refundable tax credit for innovation income. The tax credit for innovation income could be carried forward indefinitely and could be offset against corporate income tax of (one of) the following taxable periods. Taxpayers would have the choice for each taxable period whether or not to apply this tax credit. This option would enter into force as of assessment year 2025.
This is particularly relevant in view of the introduction of the GloBE / Pillar 2 rules in Belgium. As a result of this modification proposed by the draft law, companies would have the option to voluntarily increase their current tax, thereby raising their effective tax rate (“ETR”), and subsequently carry forward any remaining unused portion of the IID as a non-refundable credit. If the ETR for a given taxable period would exceed 15%, the tax credit for innovation income could be utilized to reduce the ETR accordingly.
Any further questions? Don’t hesitate to reach out to Evi Geerts, Pieter Deré, Tom Wallyn or your regular PwC tax contact.
