As previously announced (see also our newsflash of 10 October 2023), the Belgian Federal Government reached an agreement on the federal budget in the first half of October 2023. One of the important tax measures resulting from this budget agreement relates to specific changes to the Belgian investment deduction regime, a measure to support the Belgian investment climate.
Current regime
In a nutshell, SMEs and qualifying individuals may – per today – benefit from the ordinary investment deduction, a deduction to the taxable income base amounting to 25% of the acquisition or investment value of investments made between 1 January 2021 and 31 December 2022. Said percentage has dropped to 8% for investments made as of 1 January 2023.
In addition, and next to the ordinary investment deduction regime mentioned above, Belgian tax law provides for specific categories of investments which may – also for non-SMEs – qualify for the investment deduction as well (e.g. in case of specific energy-saving investments, investments in research & development, investments in carbon free trucks, etc.). The corresponding percentages of the investment deduction for these types of investments vary. For investments in research and development and patents, a tax credit is available as well.
Expected changes to the regime
Next to some specific / technical changes to the regime (e.g. corrections may have to be made in case salaries have been included in the acquisition or investment value of a fixed asset of which the employer could benefit from the (partial) professional withholding tax exemption regime), the new regime will – once the final law will be voted and come into force – result in an increased rate of the ordinary investment deduction regime from 8% to 10%. The 10% will further increase to 20% for qualifying digital investments made by SMEs / qualifying individuals.
Furthermore, the new regime will replace the previously mentioned specific categories of qualifying investments in an increased “thematic” investment deduction of 40% (30% for non-SMEs). More in particular, the thematic investment deduction will be applicable for investments made in one of the following categories:
- Investments relating to the efficient use of energy and renewable energy;
- Investments in zero-emission transport;
- Environmentally friendly investments; and
- Supporting digital investments (linked to the above-mentioned categories).
A list of eligible investments for the “thematic” investment deduction will be published by Royal Decree (and will be reviewed / updated periodically). Important to note is, that – in order to claim the investment deduction – the taxpayer will amongst others have to request an affidavit, which has to be attached to the taxpayer’s income tax return.
Finally, and next to the above-mentioned ordinary and thematic investment deduction, a third category of investments may benefit from the investment deduction regime, i.e. the so-called “technology” deduction. More in particular, the technology deduction will provide for a 13.5% investment deduction for qualifying investments in patents and fixed assets which are used to support research and development of new products and future-oriented technologies that have no impact on the environment or that aim to minimise the negative impact on the environment of existing products and technologies. The 13.5% will increase to 20.5% in case the investment deduction will be spread over time (not applicable for investments in patents). Taxpayers could opt to apply a tax credit for this category of investments. Compliance formalities (incl. affidavit) have to be respected as well.
A taxpayer can only choose one of the above-mentioned types of investment deduction per fixed asset.
Note that the above is a highly simplified summary of the expected new investment deduction regime only, but may result in significant tax benefits. If the corresponding tax law will be finally voted, it is expected that the new regime will be applicable for investments made as of 1 January 2025 (apart from the correction related to the (partial) professional withholding tax exemption regime, which will be applicable for investments made as of 1 January 2024).
On a separate note, this week the P2 implementation law has been introduced in the Belgian Chamber. The most recent administrative guidance of the OECD in the framework of Pillar 2 (global minimum tax) is also expected to be included in the further updates of the Pillar 2 legislation as well.
We would be happy to further discuss the potential applicability of said (adjusted) regime with you separately.
