Today, the Council of Ministers approved the new Belgian Innovation Income Deduction (IID) which will be BEPS-compliant and will replace the abolished Patent Income Deduction. The draft law is now subject to recommendations from the Council of State.
The important takeaways of the IID are:
- The taxable result of a Belgian company or branch will be reduced by 85% of the total net income related to intellectual property (IP) rights;
- The net income will be determined by the modified nexus approach;
- The IID will apply to income derived from patents and supplementary protection certificates. It will also apply to breeders’ rights, orphan drugs, data and market exclusivity and IP from copyrighted software;
- Capital gains on the qualifying intangibles can also benefit from IID if they are included in the Belgian taxable basis of the company or branch, subject to a reinvestment requirement;
- The deduction stays applicable in the framework of mergers and acquisitions;
- The non-used IID can be carried forward;
- A temporary exemption can apply when the request of the patent is still pending.
This IID regime will enter retroactively in to force as from 1 July 2016. More details will follow in a future PwC newsflash.