Introduction of a tax deduction for innovative income

On December 2, 2016, the Council of Ministers has approved a pre-draft bill introducing the so-called Innovation Income Deduction (IID).

Pursuant to the Law of 3 August 2016, the IID replaces the Patent Box incentive regime to comply with OECD BEPS Action 5 guidelines. Henceforth, the deduction is no longer granted on a gross but on a net-income basis.

In order for the IID regime to remain competitive despite OECD limitations, the deduction will be extended to:

  • Breeders’ rights
  • Orphan drugs
  • Data and market exclusivity
  • IP from copyrighted software

The deduction will be granted for up to 85% of the total net income related to intellectual property rights and any unused portion of the deduction can be carried forward. The pre-draft bill allows for the possibility to claim the deduction as from the moment that the corresponding patent application is submitted.

It is expected that the bill will be put up for voting and will be published in the Belgian Official Gazette before the end of the year. Allegedly, the new regime would be applicable retroactively as from July 1, 2016.

The new IID regime is an important new incentive for the IT, technology and innovation industries. If you have any questions regarding this new regime, do not hesitate to contact us.