Belgium: Parliament approves deduction for innovation | KPMG | GLOBAL
Share with your friends

Belgium: Parliament approves deduction for innovation income

Belgium: Parliament approves deduction for innovation

The Belgian Parliament has approved a draft law that introduces a deduction for innovation income. The legislation will be published in the Belgian official gazette shortly. The new regime will replace the patent income deduction (that was previously repealed but with a “grandfathering period” until 30 June 2021) because the patent income deduction was found not to be in line with the OECD “modified nexus approach.” The new deduction for innovation income will be effective retroactively as from 1 July 2016.


Related content

Deduction for innovation income

The main features of the new regime are:

  • The deduction equals 85% of net income from qualifying intellectual property (IP).
  • The deduction applies to income from patents or supplementary protection certificates, breeders’ rights, orphan drugs, data and market exclusivity and copyrighted software. Capital gains on such IP also qualify if reinvested.
  • The net income is determined based on the “modified nexus approach.” According to the “modified nexus approach,” there needs to be sufficient substance and an essential link between the expenses, the IP and the related IP income. This is expressed in the following formula—[qualifying R&D costs x 1,3 / total R&D costs] x total IP income = qualifying IP income—The costs of outsourcing to related parties are not treated as “qualifying costs,” contrary to the cost of outsourcing to unrelated parties.
  • A “tracking system” is introduced whereby taxpayers must closely monitor the expenses, IP and income.
  • The unused deduction can be carried forward.
  • The taxpayer can already claim the deduction through an exempt reserve while the patent request is pending.


Read a February 2017 report [PDF 120 KB] prepared by the KPMG member firm in Belgium

The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.

Connect with us


Request for proposal