The target groups are natural persons and small companies, provided that they meet a number of conditions. In this way, the government hopes to encourage investment in this difficult crisis period.
Increase of the normal investment deduction
The normal investment deduction has been around for quite some time, but has undergone quite an evolution and an increase in recent years. An overview.
The Corona Effect
From 1 January, after a temporary increase to 20%, the investment deduction was 8% again. But the Corona crisis then arose and, in order to stimulate investments and not delay them, the investment deduction was again temporarily increased for investments made between 12 March 2020 and 31 December 2020. This time to 25%.
The so-called Corona III Law introduced another important innovation. The term for the transfer of the unused investment deduction wasextended. If there is no or insufficient profit, the investment deduction can, in principle, only be carried forward for one year to the next taxable period. The new law extends this term to two years for investments made in 2019. In other words, the unused deduction can be carried forward to the next two taxable periods (2020 and 2021).
The Programme Law of 20 December 2020, meanwhile, stipulated that both the increased basic rate of the investment deduction (25%) and the term for the transfer of the unused investment deduction (2 years) will be extended until the end of 2022.
What are the basic conditions?
In order to be eligible for the application of the normal investment deduction, the following basic conditions must be cumulatively fulfilled. They must be:
- Investments by natural persons who make profits or gains, or by companies that are legally classified as small;
- Investments in tangible or intangible fixed assets that can be depreciated over a period of at least three years;
- Investments acquired or created in a new state during the taxable period (see further for a detailed discussion of this condition);
- Investments that are actually and exclusively used for professional activities in Belgium.
Which investments are excluded?
Some investments are irrefutably excluded from the application of the investment deduction.
1. Investments in fixed assets that are not exclusively used for the professional activity.
In our opinion, this condition does not prevent the normal investment deduction from being applied to a constructed property that is used partly privately and partly for professional purposes. The investment deduction is then, of course, reserved for the professional part. The tax authorities endorse this position, and add the condition that the professional premises must be clearly separated from the private premises.
This exception must be interpreted strictly, however, and cannot be simply applied by analogy to other situations. For other (tangible) fixed assets, the distinction between private and professional is more difficult to establish.
2. Investments in fixed assets that cannot be depreciated, such as land, or whose depreciation is spread over less than three taxable periods.
3. Investments in assets acquired or created with the purpose of transferring the right of use to a third party, unless the right of use is transferred to a taxpayer who would benefit from the same investment deduction.
Suppose a small company has a new building built.
If the aim is to then make it available to its director on a completely private basis (free of charge with benefit-in-kind calculation, or through leasing), the company cannot apply the normal investment deduction.
If the premises are rented out to another small company, however, it can apply the investment deduction, provided that the lessee company meets all the conditions for the application of the normal investment deduction, and does not itself make use of its right to investment deduction.
4. Investments in passenger cars and dual-purpose cars, including the so-called 'false' light trucks, which are equated to a passenger car by the tax authorities and do not fulfil the conditions of a light truck.
Basic condition under the microscope
Investments that were acquired or created during the taxable period.‘
The investment deduction is, in principle, applicable for each assessment year with respect to the fixed assets acquired or created during the year or the fiscal year connected to that assessment year, i.e. which can be depreciated during that year or fiscal year.
According to the tax authorities, this is the case if the investment:
1. either actually came into the possession of the company during that period;
2. or if the taxpayer became the legal owner of it during that period because it refers to a completed sale with immediate transfer of ownership, although it has not yet been delivered and/or paid for.
Intangible and tangible fixed assets on which parties have concluded an agreement, but which have not yet been acquired (such as orders, purchase agreements without immediate transfer of title, etc.), may be regarded as having been acquired or created during that period, up to the amount of the advance payments (i.e. prepayments) made during any year or financial year and recorded as such.
An invoice in itself is therefore not sufficient, nor is it necessary to speak of an 'investment'. What is required - with the exception of advance payments - is that there is a taking of possession or transfer of ownership. If the investments are actually taken into possession by a taxpayer, but the invoices only follow at a later date (e.g. in a subsequent financial year), then there may already be an investment on the date of actual occupation. This is the case, for example, of a small company that takes possession of a building at the end of 2019, but for which it only receives the invoices at the beginning of 2020.
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