1 ETG Gothenburg 2010 : Belgian tax incentives for R&D and IP

2 People Wage withholding tax exemption Innovation premium Expatriate tax regime Belgian R & D Centre Favorable transfer pricing rulings Activities Investments Patents Investment deduction R&D tax credit Accelerated depreciation Tax exoneration for regional grants Patent Income Deduction

3 1. Investment deduction / tax credit Increased investment deduction or tax credit applies to investments in R&D and patents. R&D has to be related to new products and/or future technologies which have no negative effects on the environment or which try to minimize these negative effects.

4 1. Investment deduction / tax credit The investment deduction or tax credit applies to assets which are: –Acquired as new assets or established within the company; –Used in Belgium to exert the professional activity; –Depreciable over at least 3 years.

5 1. Investment deduction / tax credit Since tax year 2007, companies have the option to choose for a tax credit instead of the increased ID for R&D and patents. The choice is irrevocable.

6 1. Investment deduction / tax credit The tax credit is deductable of the corporation tax which has to be paid. The tax credit is refundable when it has not been deducted for 5 subsequent years (in case of a lack of taxable income).

7 1. Investment deduction / tax credit Rates increased ID (tax year 2011): –‘one shot’ deduction: 13,5% of acquisition value; –‘spread’ deduction: 20,50% of annual amortization. Rates tax credit (tax year 2011): –‘one-shot’ credit: 13,5% x 33,99% of the acquisition value; –‘spread’ credit: 20,5% x 33,99% of the annual amortization.

8 2. Wage withholding tax exemption The employer retains the withholding tax on the remuneration of the researcher, but 75% of the retained tax must not be paid to the tax authorities. The employee can credit 100% of the withholding tax against final tax liability

9 2. Wage withholding tax exemption Exemption for: –Universities, colleges, certain funds for R&D and recognized institutions for R&D; –Companies which have concluded a partnership with the aforementioned institutions; –Young innovative companies;

10 2. Wage withholding tax exemption Young Innovative Companies = Small companies which: –Spend an amount to R&D, at least 15% of the total cost of the preceding taxable year; –Exist less than 10 years; –Are founded as a new company and are not the result of a merger, restructuring, acquisition or expansion.

11 2. Wage withholding tax exemption Small companies can not exceed more than 1 of the following criteria: –Employees (average): 50; –Turnover: EUR (excl VAT); –Total assets: EUR > 100 employees (average) = no small company

12 3. Accelerated depreciation Tax depreciation on R&D: 3 years instead of 5 years (straight line method) In-house created R&D does not have to be capitalized.

13 4. Tax exoneration for regional grants Exoneration for regional grants in favour of R&D. Subsidized assets can not be transferred during a period of 3 years.

14 5. Tax deduction for patent income Tax deduction equal to 80% of the royalties received from qualifying patents. Encourage companies to invest in R&D for their own account and to exploit those inventions their self

15 5. Tax deduction for patent income Beneficiaries: –Belgian companies; –Belgian branches.

16 5. Tax deduction for patent income Qualifying patents : –Income from patented inventions and supplementary protection certificates; –Which have not been used by the tax payer, a licensee or a related party for sales of goods and services before January 1, 2007; –Owned by the tax payer resulting from own research and development activities in research centers in Belgium / abroad or; –Acquired by the Belgian company or establishment via purchase, contribution or under a license agreement if the patents are further developed by the tax payer.

17 5. Tax deduction for patent income Research center : –The beneficiary must have a research center under the form of a separate division or a branch of activities (substance)

18 5. Tax deduction for patent income Qualifying income: –Patent income that is taxable in Belgium –Two types of income License income whether periodic or fixed Income included in the selling price of goods and services of the company –Excluded: income from the transfer of ownership of patents

19 5. Tax deduction for patent income Tax deduction: –80% of the income received from patents –Effective tax rate = 20% x 33,99% or 6,8% –Deducted from all types of taxable income –No carry forward or carry back Anti-abuse provisions

20 6. Belgian expatriate tax regime Expatriate = special tax status –Employment in Belgium in qualifying company; –Employment of temporary nature; –Non-resident of Belgium; –Foreign researchers and other specialized foreign staff.

21 6. Belgian expatriate tax regime a) Expatriate allowances or expense reimbursements are tax-free: –Tax equalization; –Housing allowance; –Cost of living allowance; –Home leave allowance;

22 6. Belgian expatriate tax regime Non-repetitive vs. repetitive expenses: –Non-repetitive: tax – free; –Repetitive expenses: max. € / year for staff employed by research centers.

23 6. Belgian expatriate tax regime b) Travel exclusion: –Remuneration relating to days worked outside of Belgium is not taxable; –Excluded remuneration is calculated according to presence rules provided by Belgian tax authorities. c) Social security contributions: –Expatriate allowances / expense reimbursements are not subject to Belgian employer and employee social security contributions

24 7. Other

25 Questions ?

26 The Intellectual Property Tax Law in Luxembourg ( art. 50 bis )

27 Intellectual Property Income From : Copyright on software Patent Domain name Trademark Design or model

How to become a owner ? Developed by the company By acquisition

29 Conditions to be qualify as an “IP” : Acquisition after December 31, 2007 Expenses must be recorded as an asset IP can’t be acquired by an “affiliated company”

What’s an affiliated company : A company X is considered as an affiliated company of a company Y if : –X directly holds a participation of 10 % in the share capital of Y ; –Y directly holds a participation of 10 % in the capital of X; –10% or more of share capital of X and Y are directly held by the same company.

31 Regime applicable to the “IP”: Tax exempt for 80 % of their net positive revenue AND Deduction’s are possible on the income with : - Direct expenses - Yearly amortization - Depreciation

Example of “IP” : 32 « IP » revenues : ,00 € Direct expenses : 3.000,00 € Amortization : 250,00 € NET « IP » revenue : 6.750,00 € « IP » Taxable : 1.350,00 € Example : with only Royalties Effective tax-rate 5,7 % ( 20 % x 28,59 % )

Example : with mixed Income Tax rate for this case : 14,60 %

34 Tax deductions on the new yearly investments of amortizable assets except buildings & agricultural livestock. IP is exempted from the wealth tax No liquidation tax on companies More benefits in Luxembourg :

35 Large number of treaties to receive an exemption of withholding taxes at source

36 Support to finance an R&D Project : – Subsidies when investment project is financed by equity –Between 25 % and 100 % of investments covered –To constitute your file you can be helped by » –Your file must be sent to the Ministry of the small and Medium-Sized Business : »

–Interest-rate subsidies when the investment project is financed through a bank loan * –Financement must be done with Société Nationale de Crédit et d'Investissement (SNCI), » –Rate of 2,5 % until 25 % of the investment (*) Suspended due to the economic crisis

Conditions to have the support : – Must be asked at the latest two years after the investment –Has to be used in normal terms of amortization or not before expiration of the 10 years

–Grant for researchers and doctoral graduates –More information on

40 Questions ? Thank You

Appendix : List of treaties

42

CountryDate of the tax treatyEffect fromArticle% FranceC Art.10 - GéorgieC Art.12 - GrèceC Art.125 or 7 Hong KongC Art.123 HongrieC Art.12 - IndeC Art.1210 IndonésieC Art.1212,5 IrlandeC Art.11 - IslandeC Art.12 - IsraëlC Art.125 ItalieC Art.1210 JaponC Art.1210 LettonieC Art.125 or 10 LituanieC Art.125 or 10 MalaisieC Art.128 MalteC Art.1210 MarocC Art