Tax audits – Partial wage withholding tax exemption for R&D

Christiaan Moeskops 15 March 2019


The Belgian tax authorities are again issuing tax audits with respect to the application of the wage withholding tax exemption for Research and Development over income year 2017.

Extensive list of questions 

A few years ago, a similar wave of audits took place. Compared to the previous tax audits, we notice that the list of questions is a lot more extensive. Next to the information with respect to the legal conditions for the application of the exemption, the questions are also focused on for example:

  • the funding of R&D projects;
  • the possession of patents or other IP rights related to the R&D activities;
  • the tax treatment of R&D costs (capitalized or deductible);
  • the application of the exemption with respect to vacation pay, year-end premium and other exception payments.

It is important to note that the information to be provided exceeds what is required by law. Also the legislation tends to be interpreted very strict by the Belgian tax authorities.

Once an audit is announced, the company has 1 month to provide the requested information. Therefore, it is of the utmost importance to be well prepared for the audit in order to substantiate the exemption claimed and to provide the information that is legally required. Although the investigation period is (only) 3 years, the assessment period is 5 years. In the case of an incorrect application of the exemption, the exposure can be substantial.

Way forward

Should you receive a request for information with respect to the application of the wage withholding tax incentives, do not hesitate to contact your PwC team.PwC has a team with extensive experience in this matter to assist you from strategy through execution. The support PwC can provide includes:

  • determining how the company can gather and deliver the information efficiently to the tax authorities;
  • ask for an extension of the one month reply term;
  • assist with an on-site visit by the tax authorities;
  • analysing whether the position taken by the Belgian tax authorities is correct;
  • assisting the company in both the administration (i.e. pre-court) phase and the legal (i.e. court) phase.

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