Research and development: Belspo's fiscal role
The exemption from withholding tax (BV) for research and development is particularly important for attracting companies that want to invest in new technologies. But what is actually covered by the term 'research and development' (R&D for short). The Federal Public Planning Service Science Policy, called Belspo, can tell you.
Withholding tax exemption
The BV exemption system for research and development exists since 2003. But over the years, its scope has expanded. Where initially it was only open to universities, today any company can claim such an exemption, subject to compliance with a series of conditions.
The exemption is quite interesting: the company must withhold withholding tax from the wages of its qualifying researchers according to the normal rules. But it only has to pay 20% of that sum to the Treasury. It can use the other 80% that it is allowed to keep to reinvest in research. It is not permitted to transfer this sum to the researcher.
The researcher himself will be able to settle the BV withheld when calculating the ultimate personal income tax due, not just the BV paid on. The exemption therefore makes no difference to the researcher.
What is R&D?
As more companies became eligible for the exemption, it became necessary to publish a definition of R&D. This happened in 2013 when it was stated that R&D it considered when it comes to 'fundamental research', 'industrial research' or 'experimental development'.
To check whether a particular project within the scope of these three pillars, the Federal Public Planning Service Science Policy (Belgian Science Policy Office or Belspo) was called in.
Initially, each project had to be 'registered' with Belspo. But since 2014, Belspo's role continues. The service now advises on whether the activity falls under the definition of R&D. Those opinions are binding.
What if the tax authorities do not agree?
A case was submitted to the Antwerp Court of Appeal in which an engineering firm requested exemption for a number of projects. The projects, started in 2013, were registered with Belspo in 2016, which issued a certificate. The attestation merely stated that the R&D activities were accepted as recurring and/or structural R&D activities. The tax authorities considered that the certificate was insufficient to demonstrate that there really was an R&D activity. The first judge followed the tax authorities and conducted his own investigation and then concluded that it was not actually R&D.
On appeal, the taxpayer was able to submit a more recent binding opinion from Belspo, which was later confirmed by Belspo in the course of the proceedings.
An essential point in the judgment of the court is the confirmation that Belspo's advice is binding on both the taxpayer and the tax authorities. The tax authorities do try to demonstrate to the court that Belspo misses the ball, but the court does not actually go into that at all. There is a certificate that qualifies the activity as R&D and that is what counts.
The court largely limits its investigation to the validity of Belspo's advice.
Initially, it was established that the certificates were issued, quite some time after the years for which the exemption was claimed. But the court doesn't have a problem with that, since at the start the certificates did not have to be requested in advance. That has been the case since 2014.
The court then looks at the advice and the application procedure. The application procedure is described in the law, but the legislator is silent about what must be included in the advice. The court examines the case law and concludes that the certificate must at least state which projects are involved, the duration of those projects, who the employees are, etc.
The court finds that Belspo's first advice does indeed not meet those conditions. But the advices which were delivered later (in 2018 and 2020) together do meet those requirements and, as a result, the projects can benefit from a BV exemption.
Practice shows that the tax authorities have little confidence in Belspo's certificates. An investigation by the business firm Ayming shows that companies applying for the exemption run a high risk of an audit in which in many cases the exemption is ultimately refused, even though Belspo recognizes the project as an R&D project. In a post-Covid era where many companies have to reinvent themselves, that is not a good thing.