Executive summary:
- The new position of the Belgian tax authorities regarding the notification of R&D programs and projects to Belspo is requiring a more proactive and detailed reporting
- As a result, the existing Belspo procedure of annual updates is temporarily abandoned in favor of multi-year applications including relevant R&D information
- Applicants are advised to update existing notifications prior to August 1st 2023 and raise awareness to relevant internal R&D stakeholders on the need to communicate prior to the start of projects
Context
In our previous alert of May 3rd 2023, we reported on the increasingly restrictive regulatory framework of the partial wage withholding tax exemption for research and development, substantiated by a new Circular Letter issued by the tax authorities regarding the preliminary Belspo notification formalities on qualifying R&D programs and projects.
As of August 1st 2023, the tax authorities expect all R&D programs and projects to be notified in the Belspo portal prior to the actual start of said programs or projects. Failure to comply will result in a full exclusion of the exemption for those programs and projects for their entire duration. Until now, the application also knew a pre-emptive nature, be it with a less formal practical application. As a result, the penalty exclusion would only apply on the period preceding the notification, safeguarding the application of the exemption for the remainder of the program lifetime after the notification date.
In a communication distributed on July 5th 2023, Belspo has now communicated on the practical consequences of this new position. This communication will be pending further clarification by the administration on the further practical implementation of the measure.
Changes in Belspo methodology
In essence, the position with regards to the indicated start and end dates, as well as the annual copy of the notified R&D programs or projects has changed. Concretely, although the requirement of a preliminary notification, including a “realistic” start and end date is not new, it is offset against Belspo’s previous methodology of annual updates to existing programs or projects.
In the past, it has been advised, especially for projects with a longer lifetime, to (re-)notify these projects on an annual basis, indicating the relevant year in the project title as well as a start and end date in line with the relevant calendar year. For example, a three year project X, starting in March 2022 could be notified as follows :
- In February 2022 : Project X 2022 – start date 01/03/2022 – end date 31/12/2022
- In December 2022 : Project X 2023 – start date 01/01/2023 – end date 31/12/2023
- In December 2023 : Project X 2024 – start date 01/01/2024 – end date 31/12/2024
- In December 2024 : Project X 2025 – start date 01/01/2025 – end date 28/02/2025
Considering the emphasis in the new tax position on realistic start and end date, Belspo has now indicated not to continue this approach for the time being, considering the annualized start and end date may be deemed as not realistic*.
In line with the strengthening position of the tax authorities during audits on the matter, PwC had already advised to shift towards a yearly application indicating a realistic start and end date based on the information available on the R&D activities at the time of updating the Belspo portal.
In practice, one should now include – per program and/or project – all relevant information relative to the entire expected duration of the R&D activities, including a realistic estimation of the expected start and end date, even if the latter would be in a different calendar year. For existing programs and projects, the R&D information should reflect programs and projects having started both prior and following August 1st 2023.
Furthermore, Belspo has also clarified the event where in the course of an existing program, new projects or programs are identified and initiated as part of said program, so-called clusters. As these cannot always be foreseen at the moment of notification of the overarching program or project, they can still be added at a later date, provided this is done prior to the start date of the new cluster and that the end date, if impacted, is updated accordingly. It is advisable to keep record of the changes made to the Belspo portal.
Action required
We strongly recommend applicants to proactively review the notifications that were made in the past to ensure they meet the newly instored standards, adjusting from annualized to multi-year projects where relevant and including relevant R&D information for said period.
Finally, it is paramount that applicants take the necessary steps to increase the awareness with internal stakeholders of R&D programs or projects on the need to notify new initiatives as early as possible, and reflect these in new or updated notifications in advance of carrying out the relevant activities. Applicants should assure a fitting follow-up of the relevant R&D activities, their reflection in the application, as well assure sufficient documentation on both the activities as well as the application process.
For more insights on partial withholding tax exemption and further assistance with the application thereof, please reach out to your regular PwC contact, Bart Van den Bussche, Pieter Nobels or Pierre Demoulin.
*The yearly update of the personnel should however still be recorded to reflect the applied wage withholding tax exemption. The update of the program or project content should be seized for the time being.
