Partial wage withholding tax exemption for R&D: What the Science Policy Office can do for you

The partial wage withholding tax exemption for wages paid to researchers is Belgium’s most widely applied measure to promote research and development (‘R&D’). More general information about this tax measure can be found here.

According to one source, 7 out of 10 innovative companies apply this measure. However, according to the same source a substantial amount of taxpayers run in to trouble during a tax audit.

Belgian Science Policy Office

Nevertheless, it is possible to substantially mitigate that risk. Companies can call upon the help from the Federal Public Planning Service Science Policy, better known in Dutch as ‘Belspo’ (or the ‘Belgian Science Policy Office’).

Within the Belgian Science Policy Office, a dedicated team handles requests for advice in relation to the partial wage withholding tax exemption. The law provides for the possibility for both the taxpayer and the tax administration to apply for advice with the Belgian Science Policy Office when confronted with issues regarding wage withholding tax exemptions. The advice is, in principle, binding upon both the taxpayer and the administration.

Different types of advice

The Belgian Science Policy Office can issue a binding advice on the following topics:

  • The question whether or not a given diploma qualifies for the exemption. This is also possible for foreign diplomas. When in doubt, the Office will refer to NARIC, the institute that is responsible for the recognition of foreign qualifications (see FAQ No 10 on the website of the Belgian Science Policy Office);
  • The question whether a project or program qualifies as a research or development project or program.

In addition, the Belgian Science Policy Office can allow companies “that structurally or repeatedly engage in activities of an R&D nature to [possibly] discuss with the Office a framework for notifying the programs”. This possibility allows to significantly lower the administrative burden for companies that engage in multiple R&D projects.

In practice

Pursuant to the relevant tax legislation, the executive branch of government has the authority to determine the procedures and modalities regarding the advice with the Belgian Science Policy Office. Up to the present day, however, this has not been done. The current rules are purely based on daily practice. For example, recently the Belgian Science Policy Office has started to require that the portal at the Office is fully up to date before one can apply for an advice on the structural nature of the R&D activities.

A request for advice must be sufficiently motivated, taken into account the 5 constitutive criteria for R&D. By doing so, chances of discussions with the tax administration are significantly reduced.

In other words, it may prove to be useful to occasionally update a company’s practices, even if that company has been applying the tax measures undisturbed for years. In some cases indeed, the tax administration can go back 7 years to ‘rectify’ the situation. In combination with late penalty interest of 7% (4% as of 2018), the moment of disillusionment rather quickly arrives.

But that does not have to happen. An advice with Belspo already gives a fair amount of certainty.

Mythra has ample experience in assisting with requests for advice and with the implementation of the partial wage withholding tax exemption for R&D. Do not hesitate to contact us for further information or for assistance.