Tax
Corporate tax deduction on income generated by innovative software | the Belgian tax authority issues further guidance
Published on 13th July 2021
The Belgian tax authority has issued during this summer a comment on the conditions to be met for software to benefit from an IP deduction. The comment (which was published as an FAQ) explains that the conditions are applied in a comprehensive way, in a broader manner than certain previous unofficial comments. So, the deduction is easier to obtain than initially thought.
This deduction, known as the Innovation Income Deduction (IID), was introduced in July 2016 to update and extend the Belgian patent box regime. It allows Belgian companies and the Belgian permanent establishments of foreign companies, which are the full owner, co-owner, usufructuary, licensee or rights owner of innovative IP rights/assets, to deduct up to 85% of the net income generated by these IP rights. An important feature of this tax regime is that all software protected by copyright, including derivative works of existing software, falls within the scope of the deduction.
Consequently, companies may benefit from an effective tax rate of 4.44% on qualifying IP income (which will be even further reduced to 3.75% with effect from 2020 due to the reduction of the ordinary corporate tax rate in Belgium).
We would be pleased to provide you with a copy or unofficial translation of this FAQ, which has only been published in French and Dutch by the Belgian tax authority. We would be delighted to answer any questions related to this very advantageous patent box regime and to advise how your company might benefit from it.
