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Belgian Supreme Court and R&D tax exemption: preliminary notification condition essential

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Belgian tax law provides various favorable measures to stimulate R&D activities. One such measure is the 80% exemption of professional withholding tax. This exemption is applicable when the company pursues a structured R&D program or project and R&D activities are provided by researchers holding a qualifying scientific degree. A key condition to apply this tax exemption is a preliminary notification of the qualifying program or project with the Belgian Science Policy Office (“Belspo”). This preliminary notification should include the following data:

  • The identification of the party liable for the professional withholding tax; 
  • The description of the project or program demonstrating that it is geared towards fundamental research, industrial research or experimental development; and
  • The expected starting date and the proposed ending date of the project or program.

The fulfillment of the above conditions is essential, not only because they are included in the tax legislation, but also because the guidelines of the Belgian tax authorities specifically state that any project or program which is not notified before the starting date, can only benefit from the favorable tax regime as of the month in which the project or program is effectively notified to Belspo.

This strict interpretation of the above application conditions has been confirmed and even further tightened by the Belgium Supreme Court in a recent judgement (Supreme Court, 6 January 2023). Indeed, the Court decided that this notification should in any case be made “beforehand”, clearly meaning “before the starting date of the project or the program” (and not – for example – in the course of the project or program).

The case brought before the Supreme Court concerned a company which initiated an R&D project prior to 2014. The notification, however, only took place in 2016. The company introduced a request to reclaim the professional withholding tax paid from 2012 unto 2015. The litigation focused on the professional withholding tax paid in 2014 and 2015. The Belgian tax authorities stated that the notification was made too late so no exemption should be granted. The taxpayer argued that the application should not have been made any sooner than the date of the effective application of the exemption regime (even if this would only be done during the administrative reclaim procedure).

The position of the tax authorities was confirmed by various tax courts and finally also by the Supreme Court.

The Supreme Court refers to the fact that the notification, as prescribed by the tax law provisions, should specifically mention the starting date of the project.

As a general takeaway for any taxpayer wishing to apply the R&D withholding tax exemption, it should be clear that a highly disciplined compliance with the various legal conditions for the tax exemption, is key. No leniency will be granted.