BELSPO notification for R&D wage tax exemption: Updated and stricter guidelines published

A new circular published by the Belgian tax authorities clarifies the notification requirements related to the R&D wage withholding tax partial exemption following the 6 January 2023 Supreme Court judgment which significantly alters the interpretation of the conditions that must be satisfied for a BELSPO notification to be considered valid.

R&D wage withholding tax partial exemption and the prior notification requirement

In order for the 80% wage withholding tax exemption to be applicable, article 275/3 of the Belgian Income Tax Code (“ITC”) provides, among other conditions, that R&D projects and programmes will only qualify if they are notified to the Federal Science Policy Department (“BELSPO”). The legal provision further indicates that a valid notification must indicate the expected start and contemplated end dates of the project/programme.

Previous administrative interpretation regarding the start date condition

Prior to the new interpretation, the administrative position was that the exemption was applicable from the month in which the notification was made by the taxpayer, with no retroactive application possible. This was confirmed in the Frequently Asked Questions (“FAQs”) on the application of article 275/3 of the ITC published on the Federal Public Service Finance website.

Supreme Court judgment of 6 January 2023

The Supreme Court, however, interpreted the legal conditions differently. According to the court, the notification has to be made prior to the start of the R&D project/programme for the exemption to apply. In addition to the many practical difficulties related to this new approach (e.g., how to determine the start date of a project/programme), it is clear that this interpretation adds a significant restriction to the eligibility conditions of R&D projects/programmes for the exemption.

New administrative position

Following the Supreme Court judgment, the Belgian tax authorities issued new administrative guidance on 27 April 2023, in the form of Circular 2023/C/49 (Dutch I French) on the timing of the notification requirement for the application of the R&D wage withholding tax partial exemption.

The Belgian tax authorities have decided to retain their present, more flexible approach until 31 July 2023. However, as from 1 August 2023, the new interpretation will need to be followed for new notifications and new R&D projects/programmes. In practice, this means that the Belgian tax authorities will consider that:

• Ongoing R&D projects/programmes for which it cannot be demonstrated that a notification had been duly made (i.e., including all legally required information) prior to 1 August 2023 will never qualify for the wage withholding tax exemption going forward;
• Ongoing R&D projects/programmes for which a notification had been duly made prior to 1 August 2023 will still qualify for the exemption going forward, even if the notification was made after the R&D project/programme had started (i.e., the previous administrative interpretation remains applicable); and
• New R&D projects/programmes which will start on or after 1 August 2023 will qualify for the exemption only if it can be demonstrated that the related notification was duly made prior to the start of the project/programme.

The official FAQs on the Federal Public Service Finance website have already been amended in line with the new interpretation.

What does it mean in practice?

Failure to meet the new notification requirements could have significant consequences for taxpayers who apply the exemption. As the burden of proof rests with the taxpayer where a tax benefit is concerned, failure to demonstrate that any R&D project/programme notified on or after 1 August 2023 had yet to start at the time of the notification will result in a rejection of the whole exemption related to that project/programme, likely combined with a minimum effective 10% wage tax increase.

In light of the current audit wave with a clear focus on taxpayers applying the various wage withholding tax exemptions, it is crucial for all taxpayers potentially affected to conduct a critical assessment of the adequacy of their current BELSPO notification process having regard to the new administrative and judicial interpretation.

Our assistance

Deloitte Belgium’s specialised teams are available for assistance at all stages of the exemption process, including risk assessment, audit assistance, preparation of defence files, and calculation of the available exemption.