Just like last year (see 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.
Please find hereafter some important key takeaways. Mind the formalism and be prepared to substantiate the incentive claimed!
Mind the (expanded) formalism
First and foremost, a very formalistic approach is used in these tax audits (and in case law) with regard to the Belspo registration. As a prime example that is still applicable thereof, not notifying an end date to your research program on the online Belspo platform can be sufficient to lose the R&D incentive claimed. Furthermore, discussions have taken place regarding for example the naming of the R&D programs, the update of the employees on the portal, etc.
In this respect, Belspo has also sent an e-mail beginning of this year with the request to taxpayers applying the incentive, to make a copy of their R&D program for 2021.
We consequently see that more and more formal conditions are being added and expanded, which results in bigger administrative burden. Tax authorities are thereby supported by very strict case law.
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 confirmation before obtaining the benefit. It is obtained through payroll (and of course with some conditions and procedures) but can still be audited by the tax authorities afterwards.
In case of a tax audit, the burden of proof is thereby on the taxpayer. 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.
It is therefore recommended to build up a good defence file in advance that demonstrates that all the conditions and formalities have been met.
In order to obtain more certainty about the correct application of the R&D exemption and the correctness of the data included in the Belspo portal, your company can opt to request a binding advice from Belspo (which differs from the confirmation of the structural nature of the R&D activities). Belspo’s advice is binding for the administration and provides legal certainty with regard to the correct application of the exemption from withholding tax payment for the period in scope of the advice.
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 assisting obtaining a binding advice from Belspo and /or to prepare your company with a defence file or the future and to assist in case of a tax audit. 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.