On 16 December 2016, the Council of Ministers approved and presented to the parliament the announced new Belgian Innovation income deduction which will replace the abolished patent Income deduction.
The most important features of the new system are:
- A deduction of 85% of eligible net income;
- The OECD nexus approach (innovation expenses / total expenses)
- Eligible income will not only include income from patents, but will also include income from qualifying copyright protected software, various other intellectual property rights (breeders’ rights, orphan drugs) or medicine and pesticides for which data and market exclusivity is available;
- Eligible income (whether or not “included”) will, in addition to royalties, also include capital gains and infringement compensation;
- Unused deductions can be carried forward;
- The deduction remains applicable after a merger or acquisition;
- A temporary exemption is available for pending request.
The new innovation income deduction will apply as from 1 July 2016.