FAQ published regarding the Innovation Income Deduction (IID)

On 26 July 2018, the FPS Finance used Fisconet - you can registrate for free to consult the list of FAQ - to publish the long-awaited list of Frequently Asked Questions (FAQ) regarding the Innovation Income Deduction.

Since the law of 9 February 2017, introducing the Innovation Income Deduction, there now follows the first additional comments concerning the legal provisions of Art. 205/1 to 205/4 Income Tax Code 1992.For a more generalised explanation of the Innovation Income Deduction, which was published when the legislation was published, we refer you to an article from February 2017.

The recent FAQ contains no fewer than thirty-one questions with comprehensive answers which enable the fiscal administration to provide further details on how the recently introduced legal provisions must be specifically interpreted. An overview of a few questions:

  • Intellectual property rights - Should they be booked to the assets of the balance sheet on the company's annual accounts?
  • Intellectual property rights - When is a computer program considered to be protected by copyright laws?
  • Intellectual property rights - From when can the intended intellectual property rights be taken into account?
  • Net innovation income - how is the deduction of historical costs processed?
  • Innovation Income Deduction - What makes up the fiscal benefit that is linked to this innovation income? - Exemption - Temporary exemption;
  • Transition regime for the Patent Income Deduction - Is there a convergence between the Innovation Income Deduction and the Patent Income Deduction?

Many of the explanations relating to these questions contain a simplified reiteration of what can already be deduced from legal texts, the explanatory memo or existing practice in relation to the former patent deduction. Consider, for example, the fact that all marketing-related intellectual property rights are excluded from the Innovation Income Deduction, or what should now be understood by an included licence fee.

What is positive is that the fiscal authorities are providing certainty regarding specific costs that may or may not have to be deducted from gross innovation income.  We therefore learn, for example, that costs linked to the application for intellectual property rights do not qualify as expenditure for research and development. Costs that relate to the protection of a patent are also regarded as ineligible expenditure. Indeed, in light of the quite recent DEMPE concept1 which was introduced by the OECD in relation to intellectual property and also given the fact that the Belgian innovation deduction is applied to the innovative character which is substantiated (i.e. effective research and effective development) in Belgium, this would appear to be logical.

In addition, we noted that there is confirmation that bought-in intellectual property rights which relate to a deduction must be activated in section 'II. Intangible fixed assets'. The same goes for costs of research and development for self-developed intellectual property rights whereby the rules of Belgian accounting are followed. These determine, more specifically, that development costs can be activated and thus booked to section 'II. Intangible fixed assets' where the costs for research may also be included in the same section on condition that the costs in question are immediately and fully written off in the year they are activated.

Finally, there are additional explanations regarding a number of new elements that were implemented but which where not possible under the old patent deduction regime. For example, there was clarification of what we should understand by copyright protected software and when this can be considered as intellectual property rights. Further explanation was also provided with regard to newly defined concepts such as qualified intellectual property rights for process innovation, received damages due to a violation of intellectual property rights and amounts obtained for transferring intellectual property rights. 

Consequently, aside from a few extra clarifications, the FAQ offers a limited addition to the existing practices that are already applied by our office. Nevertheless, there is a clear need for a case-by-case approach to the application of the Innovation Income Deduction.

1: DEMPE stands for ‘Development, Exploitation, Maintenance, Protection and Enhancement’.

The requirement to register gets a broader scope
More entrepreneurs must register with the Crossroads Bank for Enterprises (CBE)
Under the aim of creating a more attractive business climate, changes were made to the existing company law. In that context, the legislator has done away with the ‘trader’ concept, replacing it with the umbrella term ‘enterprise. Besides forming the basis for the rules of the Code of Economic Law, the Judicial Code and the Civil Code, the new enterprise concept also has consequences for reg
More specific: matrimonial property law
A new compensation obligation in the legal system
What if a spouse practices his profession in a company whose shares all form part of his separate property? The Act of 22 July 2018 has introduced considerable changes to matrimonial property law. This article addresses a specific addition to that law, namely the possible disadvantage incurred by the matrimonial property when a spouse practices their profession through their own company1. 
Changes in the cary proxy and usufruct
Estate planning: recent developments
Over the last few months, we have regularly reported on the important changes in estate planning and inheritance planning. Below is an update of some of those changes.   The care proxy: secure your estate for later The classic example is a person who, due to a physical or mental limitation (e.g. coma, dementia), is – temporarily or permanently – unable to manage their assets properly.
Happy Brexmas?
How to prepare your company for Brexit?
On 10 December 2018, the British Prime Minister decided to postpone the vote on the Brexit deal in the House of Commons. The risk of a ‘no deal’ disaster scenario is increasing. What are the important dates? On 29 March 2017, the United Kingdom formally informed the European Council of its intention to leave the EU (according to the procedure provided in Article 50 of the Lisbon Treaty). C
A popular control structure
The all-powerful manager of a civil-law partnership: was it always a fiction?
The civil-law partnership has long been a popular control structure among wealth planners. In many cases, donors do not want to give up their assets entirely, and still want to retain some control over what they donate. Definitely in cases of transfers of family companies, the donors (often parents or family members) still want to retain control over the course of the business.  The advant
The tax framework
Company subsidies: exempted or not?
Various subsidies were briefly described in the article by our colleagues from Strategy and Operations. They explained that they can assist you and your company with guidance on subsidies, from A to Z.1 In this context, we would like to discuss the tax framework for subsidies: how are awarded subsidies treated tax-wise within companies? Are these subsidies exempt from corporation tax and, if
Right to deduct VAT possible for costs incurred during the purchase of shares
The Ryanair ruling
Right to deduct VAT also possible for costs incurred during the purchase of shares, if the purchase ultimately does not (fully) go ahead The European Court of Justice recently confirmed that VAT on costs incurred during the purchase of shares may be deductible even if the purchase ultimately does not (fully) go ahead. As such, the Court of Justice has upheld the principle that the preparatory t
What are the options?
The deduction for investment: an illustration of the options
The deduction for investment allows companies and natural persons who earn profits or benefits to reduce their taxable profits by placing part of the acquisition or investment value of investments in new tangible and intangible fixed assets. Depending on the size of your business and the nature of your activities, you can generally apply the regular, one-off deduction for investment of 20% (tem
Valuation of usufruct
Now also a witch hunt when usufruct is sold?
In previous editions, we have already written about the valuation of usufruct when purchasing property, but recently there have also been regular reports of checks on the valuation of usufruct when reselling. However, up until now, the case law has followed the viewpoint of the taxpayer. Brief description For several years, there has been a lot of controversy regarding the valuation of usufruc
Vlabel is using conciliatory language
Has the decrease in Flemish sales duty led to an increase in the costs for purchases of usufruct?
The decrease in sales duty: also for split purchase usufruct-bare ownership The recent drop in the rate (to 7.00%) for purchases of family homes comes with a number of conditions. For example, the purchaser must be a natural person. Following some uncertainty, it was subsequently confirmed that, in the event of a split purchase of such a property by a company for the usufruct and the bare owner f

Subscribe to our newsletter