Belgium

Foreign tax credits (FTCs)

Unilateral relief from double taxation of foreign-source income may be provided in the form of an exemption, credit, or tax reduction, depending on the type of income. Where taxable, foreign income is subject to tax only on its net amount (i.e. after deduction of expenses and foreign taxes).

Dividend income FTC

Generally, no FTC is available for foreign dividends.

Royalty income FTC

Unless a more advantageous provision (e.g. a tax sparing provision) would apply based on a DTT concluded by Belgium (see the treaty list in the Withholding taxes section), an FTC is granted under Belgian tax law with respect to foreign royalty income, provided that this income has effectively been subject to taxation in its source country. This FTC is calculated by multiplying the net frontier amount (i.e. after deduction of foreign WHT) by a fraction of which the numerator is equal to the foreign WHT that was actually withheld expressed as a percentage of the income to which such tax relates and limited to 15% and the denominator is equal to 100 less the numerator. The FTC is, in principle, included in the taxable basis of the recipient company and is only creditable against Belgian income tax to the extent that said foreign income is included in the taxable basis of the Belgian company. As regards innovation income benefitting from the IID, the FTC can only be credited against the tax due on said innovation income. Excess FTC, if any, is not refundable and cannot be carried forward.

Interest income FTC

Unless a more advantageous provision (e.g. a tax sparing provision) would apply based on a DTT concluded by Belgium (see the treaty list in the Withholding taxes section), the Belgian beneficiary of foreign interest income is entitled to an FTC under Belgian tax law, provided that this income effectively has been subject to taxation in its source country. This FTC is calculated by multiplying the net frontier amount (i.e. after deduction of foreign WHT) by a fraction of which the numerator is equal to the foreign WHT that was actually withheld expressed as a percentage of the income to which such tax relates and limited to 15% and the denominator is equal to 100 less the numerator and adjusted with a ratio taking into account the financial leverage. The FTC is, in principle, included in the taxable base of the Belgian lender to the extent the FTC can be effectively used. It is creditable against the CIT due but is not refundable in case of excess, neither can it be carried forward.

Notional interest deduction (NID): Abolished

Belgian CIT payers could previously claim NID for tax purposes, reflecting the economic cost of the use of capital, equal to the cost of long-term, risk‑free financing. The NID was abolished for taxable periods ending as of 31 December 2023.

The NID for tax year 2023 (accounting years ending between 31 December 2022 and 30 December 2023, both dates inclusive) amounted to -0.057% (0.443% for SMEs). As negative rates equal zero percent, for tax year 2023, the NID was only applicable for SMEs.

As of tax year 2013, new excess NID could no longer be carried forward, whereas, under the old rules, ‘excess NID’ (i.e. NID that cannot be claimed owing to the taxpayer having insufficient taxable income) could be carried forward for a maximum of seven years.

However, the ‘stock’ of excess NID (stemming from previous years, i.e. tax years 2012 and before) could still be carried forward for seven years (as was previously the case), though the excess NID that could be applied in a given year was limited to 60% of the taxable profit (i.e. the profit remaining after setting off carried-forward tax losses and other tax deductions). The 60% limit was only applicable to the part of taxable profit exceeding EUR 1 million. The portion of excess NID that could not be used due to the '60% rule' (i.e. 40% of taxable profit minus EUR 1 million) can be carried forward indefinitely.

As for determining the basis on which this deduction was calculated, the company's share capital plus its retained earnings, as determined for Belgian GAAP purposes and as per the last year-end date, had to be taken into account with some adjustments.

The NID was calculated based on the incremental equity (over a period of five years) and no longer on the total amount of the company’s qualifying equity. Simplified, the incremental equity equalled one fifth of the positive difference between the equity at the end of the taxable period and the fifth preceding taxable period.

In addition, various other adjustments had to be made to avoid abuse and a number of anti-abuse provisions had to be taken into account (e.g. in order to avoid double dips).

Finally, a minimum tax base should be applied. There are no limits on certain deductions (such as DRD, IID, and the investment deduction). Other deductions may offset only 70% (or 40% in 2023) of the taxable amount exceeding EUR 1 million. These deductions include, amongst others, incremental NID and carried-forward NID. The remaining 30% (or 60% in 2023) will be fully taxable at the CIT rate (see Minimum tax base in the Taxes on corporate income section).

Investment deductions

The investment deduction has been revised by the Law of 12 May 2024 on various tax provisions, as published in the Official Gazette on 29 May 2024. For your convenience, this section is divided into two parts: the former regime and the new regime.

Former regime

The investment deduction is a deduction from the tax base in addition to the normal tax depreciation on, amongst others, qualifying patents, environmentally friendly R&D investments, and energy-saving investments.

A company can benefit from a one-off investment deduction for investments made during the taxable period linked to tax year 2025 until 31 December 2024. Please find below an overview of the percentages that apply for companies:

• Patents, environmentally friendly investments for research and development, energy-saving investments, and smoke extraction or ventilation systems in catering establishments: 15.5%.
• Zero-carbon trucks, refuelling infrastructure for blue, green, or turquoise hydrogen, and electric charging infrastructure for zero-carbon trucks:
• Assets obtained or established between 1 January 2022 and 31 December 2023: 37%.
• Assets obtained or established between 1 January 2024 and 31 December 2024: 31.5%.
• Investments to encourage the reuse of packaging for drinks and industrial products: 3%.
• Investments in seagoing vessels by companies that derive profits exclusively from maritime shipping: 30%.
• In the hands of SMEs (as referred to in Article 2, §1, 5°, c) bis of the BITC), the following investments:
• Digital investments: 15.5%.
• Investments in security: 22.5%.
• Other than any of the aforementioned investments: 8%.

Taxpayers may opt to spread a 22.5% investment deduction over the amortisation period of fixed assets that promote research and development of new, environmentally friendly products and technologies.

If there are insufficient or no taxable profits, the investment deduction can be carried forward, but certain restrictions apply as to the maximum amount of investment deduction carried forward that is tax deductible in a given year. The carryforward of the above-mentioned ordinary one-time investment deduction is also limited in time.

Under certain conditions, the investment deduction carried forward can be lost after a change of ownership (see Net operating losses in the Deductions section). Note that the investment deduction for patents and R&D cannot be combined with the tax credit for patents and R&D.

In principle, only development costs can be activated; not costs of research.

New regime

On 29 May 2024, the law of 12 May 2024 containing various tax provisions was published in the Belgian Official Gazette. This law implements major changes to the investment deduction regime.

The new regime is organised around three ’tracks’:

• The general track: Ordinary investment deduction (10% or 20% [qualifying digital investments, Royal Decree still to be published]). This is only applicable to individuals and SMEs.
• The targeted track: An increased ’thematic‘ investment deduction (replacing the specific categories of qualifying investments) (40% [SME] or 30% [non-SME]). A list of eligible investments for this investment deduction will be published by Royal Decree (and will be reviewed/updated periodically). The increased thematic deduction will only be applicable to fixed assets for which no regional aid is requested (exceptions to be determined by the King).
• The technology track: The so-called ’technology‘ deduction applies in relation to qualifying investments in patents and fixed assets that 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 (13.5% [one-off] or 20.5% [spread, not applicable to patents]). Taxpayers could opt to apply a tax credit for this category of investments.

The law provides for fixed investment deduction rates and will no longer be subject to the yearly indexation mechanism.

A taxpayer can only choose one of the above-mentioned types of investment deduction per fixed asset.

The general conditions to benefit from the investment deduction remain the same.

The new regime, as well as the correction related to the (partial) professional WHT exemption regime to determine the investment deduction basis, will be applicable for investments made as of 1 January 2025.

Patents and R&D tax credit

As an alternative for the above investment deduction for patents and R&D, a company may opt for a tax credit for which the advantage corresponds to the advantage of the investment deduction, multiplied by the normal CIT rate of 25%. The investment deduction implies a deduction of the taxable basis, while the tax credit is a reduction of the tax due. A key advantage of the tax credit for patents and R&D is that it is refundable if it has not been deducted for five subsequent tax years.

As of assessment year 2025, taxpayers can choose either to fully credit the tax credit for R&D against CIT or to carry it forward according to the rules specified in the law.

Reduced wage WHT for qualifying R&D

A partial wage WHT exemption for R&D activities executed in Belgium is available to companies in Belgium. This exemption can be applied by companies if the following (cumulative) conditions are met: the applicant must execute R&D activities, the R&D projects must be notified with Belspo prior to starting their execution, and the employees need to be in the possession of a qualifying degree (PhD, master’s, or bachelor’s degree in [applied] sciences, engineering, etc.). Since mid-2023, an additional requirement was introduced by the legislator. It is today mandatory for applicants of the measure to prove they have instored fitting internal processes regarding the application of the exemption. The requirements of said internal processes have, however, not been specified.

The measure allows a maximum of 80% of the wage WHT to be exempted on behalf of the employees for whom the aforementioned conditions are met. However, the time spent on R&D activities (indicated by a percentage of the total working time of the employee) should be considered when determining the maximum applicable exemption of 80%. The exemption can only be applied for those employees that are included on the Belgian payroll and for whom the applicant is paying wage WHTs to the Belgian treasury. One should note that, contrary to the past, the benefit obtained from the application of the partial wage WHT exemption cannot be applied in combination with the R&D tax credit for the same expenses.

Content wise, a project or program can be considered as R&D if it falls within the scope of the definition of scientific research as foreseen by the Belgian legislator. A binding advice with regards to the R&D activities can be obtained with Belspo.

Particular attention should be brought to the evolving regulatory landscape with regards to the measure. Today, it has become even more important to ensure the R&D activities are notified in the Belspo portal prior to the application of the exemption by the applicant under penalty of nullity of the applied exemption for the full duration of the particular R&D activities.

Innovation income deduction (IID)

The IID is based on Action Point 5 of the OECD BEPS Action Plan (applying the so-called ‘modified’ nexus approach) and replaces the (previous) Belgian patent income deduction (PID) regime, which was grandfathered for five years (until 30 June 2021).

The qualifying patent/innovation income is calculated on a net basis. The percentage of this deduction is raised from 80% under the (old) PID regime to 85% under the IID regime, resulting in an effective tax rate of 3.75% as of tax year 2021 over the lifetime of the intellectual property (IP).

Qualifying intellectual property (IP)

The IID can apply to income derived from the following IP of which the company or branch has the full ownership, co-ownership, usufruct, or license of or right to use:

• Patents and supplementary protection certificates that have not been used for the sale of goods or services to independent parties before 1 January 2007.
• Breeders’ rights requested or acquired as of 1 July 2016.
• Orphan drugs, i.e. a drug to treat rare diseases, (limited to first ten years) requested or acquired as of 1 July 2016.
• Data and market exclusivity granted by the competent authorities after 30 June 2016 (e.g. market exclusivity for orphan drugs or data exclusivity for reports with respect to pesticides, clinical studies of generic or animal drugs).
• IP of copyrighted software resulting from a research or development project as defined for the purposes of the partial exemption of wage WHT for R&D and that has not yet generated income before 1 July 2016.

Under the IID regime, the benefit is available as of the date the patent is requested (and provided that the patent is actually granted afterwards).

Innovation income

Without making any restrictions to SMEs, the following income is considered as derived from the above qualifying IP in so far as the remuneration is included in the Belgian taxable result of the Belgian company or branch concerned:

• License fees.
• IP income embedded in the sales price of own manufactured products for which a third party would be willing to pay a license (so-called ‘embedded’ royalties).
• IP income derived from process innovation.
• Remunerations on the basis of a court/arbitral decision, an amicable settlement, or an insurance settlement.

Furthermore, the proceeds from a transfer of qualifying IP are also in the scope of the deduction, subject to a reinvestment condition to be met within five years.

For the first taxable period during which the IID will be applied, the (net) innovation income should be decreased by the overall expenditure incurred during (preceding) taxable periods ending after 30 June 2016. Alternatively, one can opt to spread this recapture on a straight-line basis during a period of a maximum of seven years. In the case that the qualifying IP right terminates or is alienated before the end of this seven-year period, a correction will apply in order to limit the IID actually applied to the amount that would have been applied if no spread recapture had been opted for.

Calculation of the IID

The IID is determined by multiplying the net innovation income by a fraction. This fraction represents the ratio between one’s own R&D activities and the outsourced R&D activities (towards related parties). As such, the taxable result of a Belgian company or branch is reduced by 85% of the total net innovation income after this fraction has been applied.

IID = ((qualifying expenditures + uplift) / overall expenditure)) x net innovation income x 85%

It is important to note that the ratio should be calculated on a net basis, implying that current year deducted overall expenditure should be deducted from the current year qualifying innovation income.

However, the law of 12 May 2024 provides that as of assessment year 2025 taxpayers will have the option not to offset part or the full amount of IID against the taxable basis but to convert it into a non-refundable tax credit for innovation income. The law of 12 May 2024 provides that the tax credit can be carried forward and offset against CIT of (one of) the following taxable periods. Taxpayers will have the choice for each taxable period whether or not to apply this tax credit.

From 2026 onwards, the effect of the tax credit for innovation income will be evaluated on a yearly basis, paying special attention to the budgetary cost of the measure and Belgium’s competitive position compared to neighbouring countries.

Excess deduction that cannot be used due to insufficient taxable basis can be carried forward to be compensated with future taxable profits.

The qualifying expenditure may be uplifted by 30%, with a maximum of the overall expenditure. This means that the uplift may increase the qualifying expenditure but only to the extent that the taxpayer has non-qualifying expenditure. The purpose of this uplift is to ensure that the nexus approach does not penalise taxpayers excessively for acquiring IP or outsourcing R&D activities to related parties.