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The deduction for investment: an illustration of the options

Tuesday 30/10/2018
De investeringsaftrek een illustratie van de opties

The deduction for investment allows companies and natural persons who earn profits or benefits to reduce their taxable profits by placing part of the acquisition or investment value of investments in new tangible and intangible fixed assets.

Depending on the size of your business and the nature of your activities, you can generally apply the regular, one-off deduction for investment of 20% (temporarily), or the increased deduction for investment of 13.5%.

In principle, the deduction is applied in the taxable period of the investment. However, in certain cases, you can decide to spread the deduction for investment over the depreciation period of the assets.

Bear in mind, however, that the deduction for investment cannot be cumulated with the application of the notional interest deduction. Given the ever decreasing rate of the latter, as well as its recently limited calculation basis, the deduction for investment can provide you with a greater tax advantage in certain situations.

Basic conditions

The following are eligible for the application of the deduction for investment:

  • Investments in depreciable tangible and intangible assets,
  • Which are acquired or established in new condition,
  • During the taxable period,
  • If these assets are used in Belgium for the professional activity.

Basic formalities

To obtain the deduction for investment, taxpayers need to:

  1. attach a completed, dated and signed form (Declaration 275 U for the corporate income tax return; Declaration 276 U for the personal income tax return) to their income tax return for the taxable period in which the fixed assets were acquired or established;
  2. for each category of fixed assets, keep a statement available for the Administration indicating for each asset the date of acquisition or establishment, the correct name, the acquisition or investment value, the normal useful life and the depreciation period.

The standard deduction for investment: rate

Whereas the standard, one-off investment deduction was de facto abolished in 2006, since 2014 it has once again become possible for small companies to reduce their taxable base with a standard deduction for investment of 4% of the acquisition value of investments in new tangible and intangible fixed assets.

From 1 January 2016, following the 'tax shift', the deduction for investment was increased even more and a new basic percentage of 8% was introduced. In addition, the scope of the deduction was extended to natural persons who earn profits or benefits.

Finally, following the 'Summer Agreement' (Law of 25 December 2017 on the reform of corporation tax), it was decided to introduce a temporary increase in the rate for natural persons who earn profits or benefits or companies that are considered small pursuant to Article 15 of the Companies' Code. The rate increased from 8% to 20%, for fixed assets acquired or established between 1 January 2018 and 31 December 2019.

The increased deduction for investment of 13.5%

In derogation to the standard deduction for investment mentioned above, investments in certain assets give the right to an increased deduction for investment. In principle, this deduction is open to all companies and self-employed persons - regardless of their size or the scale of their activity - with the exception of the increased deduction for investments in digital assets. Indeed, the latter is reserved for entrepreneurs who qualify as small companies within the meaning of Article 15 of the Companies' Code.

The assets which need to be invested in:

  1. patents;
  2. fixed assets used to encourage research and development of new products and future-oriented technologies that have no impact on the environment, or which are intended to reduce the negative impact on the environment as much as possible;
  3. fixed assets which are used to rationalise energy consumption, improve industrial processes for energy purposes and, in particular, recover energy in industry ('Energy-saving investments');
  4. smoke extraction or ventilation systems in a smoke chamber of a catering establishment;
  5. digital fixed assets which are used to integrate and operate digital payment and invoicing systems, and systems which are used to secure information and communication technology.

For the listed investments, an increased one-off deduction for investment of 13.5% can be applied for assessment year 2019.

However, if the rate of the increased deduction of 13.5% is lower than the temporarily increased rate of 20% of the standard deduction for investment, the taxpayer can choose to use the rate that is most favourable for them, provided that the conditions for the application of the standard deduction for investment are met.

Additional formalities

  • Patents

    To obtain the increased deduction on investments in patents, applicants must also substantiate their statement of assets via a copy of the contract on the basis of which the company acquired the patent or the right to exploit it, and proof that the patent or the right to exploit it has never been used by another company in Belgium in the exercise of its professional activity.
     
  • Fixed assets used to encourage research and development of new environmentally-friendly products or future-oriented environmentally friendly technologies.

    To be eligible for the increased deduction on environmentally-friendly investments in research and development, a justification document must be kept showing that the fixed assets meet the conditions laid down, or a request must be made for recognition of the assets as necessary for the establishment of a scientific research programme.

    In addition, the research purposes for which these assets are necessary must be defined by their purpose, their principles or assumptions, their technical difficulties, their innovative character, their technical and economic advantages and the characteristics of the fixed asset.

    Finally, in order to prove that the investment is environmentally-friendly, a certificate must be obtained from the competent Regional Government demonstrating that the new products and future-oriented technologies resulting from the research and development for which the fixed assets in question are used have no impact on the environment, or are intended to minimise the negative impact on the environment.

    The form to obtain this certificate can be requested from the Flemish Region at:

    Environment Departement,
    Partnerships with governments and society department f
    Graaf de Ferraris building
    Koning Albert II – laan 20, box 8
    1000 Brussels
    (tel. 02/553.85.03; fax 02/553.80.55)
    www.lne.be

  • Energy-saving investments

    For this deduction, a certificate must also be obtained from the competent Regional Government, which demonstrates the energy-saving aspects of the investments. To get an idea of what can be considered as energy saving, you can use the 'Handleiding Verhoogde investeringsaftrek voor energiebesparende investeringen' (Manual for the increased deduction for investment for energy saving investments) issued by the three Regions.

    The certificate must be requested by the taxpayer within 3 months after the last day of the taxable period in which the fixed assets were acquired or established, under penalty of expiry.

    To request this certificate, the Flemish Region can be contacted at:

    Flemish Energy Agency
    Ferraris building
    Koning Albert II-laan 20, bus 17
    1000 Brussels
    (tel.: 02/553 46 00; fax: 02/553 46 01)
    contact: investeringsaftrek@vea.be
    www.energiesparen.be/verhoogdeinvesteringsaftrek/aanvraag
     

The increased deduction for investment of 20.5%

For investments in tangible fixed assets that are used to secure professional premises or their contents, and to secure commercial vehicles, natural persons and companies that qualify as small within the meaning of Art. 15 of the Companies' Code can benefit from an increased deduction for investment of 20.5% for assessment year 2019.

The deduction for investment in maritime shipping

Domestic companies or Belgian establishments of foreign companies that are exclusively active in the shipping industry can reduce their taxable base with a deduction for investment of 30% of the acquisition price of new or second-hand maritime vessels that are acquired by a Belgian taxpayer for the first time.

The spread deduction for investment

As indicated, the deduction for investment is in principle made in the taxable period of the investment, but can also be spread over the depreciation period of the assets. The deduction is then calculated on the annual amount of depreciation of the new investment.

  1. The standard spread deduction for investment
    Natural persons who employ fewer than 20 people may apply a spread deduction equal to 10.5% of the depreciation of the assets for investments made during the taxable period linked to assessment year 2019.
     
  2. The increased spread deduction for investment
    Both natural persons and companies (regardless of size) can opt for the increased spread deduction for investment equal to 20.5% of the depreciation of environmentally-friendly investments in research and development.

This spread deduction is therefore reserved for investments in assets used to promote research and development of new products and future-oriented technologies that have no impact on the environment, or which are intended to reduce the negative impact on the environment as much as possible.  

Rates for assessment year 2019

Investments in

Patents
 

Assets for R&D of environmentally-friendly products

Assets for more rational energy consumption

Smoke extraction and ventilation systems in catering establishments

Certain digital assets
 

Securing of company premises or company cars

Maritime shipping
 

Other investments made between 01/01/2018 and 31/12/2019

Standard spread deduction for investment

Increased spread deduction for investment

Natural persons

13,5%
20%

13,5%
20%

13,5%
20%

13,5%
20%

13,5% (*)
20% (**)

20,5% (*)
 

30%
 

20%
 

10,5%
 

20,5%

Companies

13,5%
20% (*)

13,5%
20% (*)

13,5%
20% (*)

13,5%
20% (*)

13,5% (*)
20% (*)

20,5% (*)
 

30%
 

20% (*)
 

  /
 

20,5%

(*) on condition that the criteria of a small company as set out in Article 15 of the Companies' Code are fulfilled.

(**) In principle, the natural person must be considered as 'small' to apply the increased deduction for investment for investments in digital assets. However, due to the temporary increase of the standard deduction for investment to 20% - which does not require the natural person to meet that criterion - a deduction of 20% can be obtained for digital investments in 2018 and 2019, regardless of size.

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An Lettens
An Lettens
Partner Tax & Legal Services
Pieter Vandierendonck
Pieter Vandierendonck
Senior Associate Tax & Legal Services