R&D wage withholding tax incentive audits – Mind the formalism and prepare yourself

Christiaan Moeskops 13 November 2019


As mentioned in our earlier newsflash the Belgian tax authorities have been issuing extensive and numerous tax audits with respect to the application of the wage withholding tax exemption for Research and Development over income year 2017. 

Please find hereafter some very important key takeaways. Mind the formalism and be prepared to substantiate the incentive claimed!

 

Mind the formalism

First and foremost, a very formalistic approach is used in these tax audits. As a prime example thereof, not notifying an end date to your research program on the online Belspo platform can be enough to lose all the R&D incentive claimed! Although no end date is of course known for most (almost all) research programs, including one is of the utmost importance. The tax authorities are thereby supported by very strict case law.

 

Burden of proof on the taxpayer

Although the R&D wage withholding tax incentive is a substantial cash benefit to companies, it is in essence very different to regular “grants/subsidies”. This is because in most cases there has been no binding upfront application before obtaining the final benefit. It is obtained through payroll (and of course with some conditions and procedures) but can still be audited by the tax authorities afterwards.

With those tax audits, the burden of proof is on the taxpayer claiming the incentive. From the recent tax audits it has become clear that (also based on very strict case law) this burden of proof is not easily fulfilled. Details should be provided on especially the R&D time spent, the R&D projects, the formal conditions, etc. And this can give rise to discussions with the tax authorities on substantial amounts whereby the time to reply is limited. 

 

Way forward

Based on numerous tax audits and other files related to this exemption, PwC has developed an approach to help your company adhere to this burden of proof and to mind the formalism. This to assist in case of a tax audit and /or to prepare your company with a defence file for the future.  A team with extensive experience in this matter is there to assist you from strategy through execution. 

 

For more information on this topic, please don’t hesitate to contact thomas.goemaere@pwc.com