The Belgian Investment Deduction: What Will Change?

• Published date: 25 March 2024
• Subject Matter: Corporate/Commercial Law, Intellectual Property, M&A/Private Equity, Corporate and Company Law, Patent
• Law Firm: Loyens & Loeff
• Author: Mr Nicolas Lippens, Linda Brosens, Benno Daemen, Laure Moorees and Emma Parduyns

On 6 March 2024, a draft Bill was submitted to Parliament that proposes changes to the current investment deduction regime and tax credit regime to encourage the appropriate investments thereby taking into account technological evolutions and sustainable transition needs.

Below, we will set out the key elements of the proposed changes.

The Investment deduction in a new format

1. What are the features of the current investment deduction regime?

Companies acquiring new tangible or intangible fixed assets (incl. capitalised personnel expenses) used in Belgium for business purposes can, under certain conditions, claim a deduction from their taxable profit amounting to a specific percentage of the acquisition value of the assets acquired or established during the taxable period.

The general investment deduction is only applicable for individuals and small companies within the meaning of the Belgian code for companies and associations (i.e. companies that, upon closing of their last financial year, have not exceeded, during two consecutive financial years, more than one of the following criteria: an average number of 50 employees, turnover of '9m and balance sheet total of '4.5m) at a current rate of 8%. All companies can however benefit from an increased investment deduction on certain specific investments. The current increased rate varies depending on the investment being made and considers the inflation. The percentage during the past years equalled 13.5% for amongst others (i) environmentally friendly investments in R&D, (ii) patents and (iii) certain energy saving investments. This percentage has been increased to 20.5% for assessment year 2024 due to the inflation.

Recently, the Belgian legislator also introduced (under certain conditions) an investment deduction for carbon-emission-free trucks and the installation of specific refuelling infrastructure or electric charging infrastructure. The rate reduces gradually over time but equals 42% if these assets are acquired during assessment year 2024 (36,5% if these assets are acquired as of 1 January 2024, but linked to assessment year 2024).

A spread investment deduction is also possible for environmentally friendly investments in R&D which enables taxpayers to deduct 27.5% of the annual depreciations of the investments from their taxable basis for assessment year 2024 (20.5% in past years).

A number of assets are expressly excluded from the scope of the investment deduction, such as e.g. company cars and assets which are acquired or developed with the aim of transferring the usage rights to a third party.

2. What are the features of the new investment deduction regime?

Under the new regime, taxpayers acquiring new tangible or intangible fixed assets used in Belgium for business purposes can, under certain conditions, claim a deduction from their taxable profit amounting to a specific percentage of the acquisition value of the assets acquired or established during the taxable period if they meet the conditions of one of three newly introduced options:

• Option 1: the basic deduction;
• Option 2: the increased thematic deduction; or,
• Option 3: the technology deduction;

For every qualifying asset, the taxpayer should choose among these three options: there can be no cumulation of investment deductions under different options for the same asset.

The following assets are excluded from the investment deduction (regardless of the option chosen), largely in line with the exclusions existing under the currently applicable investment deduction regime:

• Fixed assets which are not exclusively used for business...