25 September 2020
Over the last couple of years, Belgium tax law with respect to the standard investment deduction has been amended on many occasions. One of the numerous corona measures consists of allowing taxpayers to benefit from a 25% investment deduction. What are the conditions?
To encourage qualifying investments, both companies and individuals subject to respectively Belgium corporate tax and personal tax are eligible for a so-called investment deduction. In essence, this comes down to an additional tax deduction on top of the tax deduction of the BE GAAP amortization of the investment. In case of insufficient taxable basis to fully absorb the investment deduction, the non-utilized part of the investment deduction can be carried-forward to subsequent years.
There are various kinds of investment deductions, e.g. increased investment deductions to promote either R&D investments and environmental – friendly investments. Both small and big companies are eligible for such increased investment deduction. In principle, the non-utilized part can be carried-forward without limitation in terms of time and amount.
There is also a so-called standard investment deduction that applies to “ordinary investments”, i.e. no “R&D” or “environmental” or other kind of “special” investment. If a company wants to benefit from the standard investment deduction it needs to be a “small or medium-sized company” as defined for Belgium company law purposes. Another particularity is that the standard investment deduction can only be carried-forward for one year. Non-utilized standard investment deduction permanently forfeits afterwards. However, the standard investment deduction has been modified a lot over the last years. To summarize:
However, to support Belgium entrepreneurs being hit by the corona crisis, a 25% standard investment deduction has been introduced for investments made during 12 March 2020 and 31 December 2020. Moreover, the Belgian tax authorities confirmed that this 25% investment deduction ‘overrules’ the specific investment deductions. In other words, the taxpayer is entitled to the most beneficial investment deduction percentage. In addition, non-utilized investment deduction with respect to investments made in 2019, can exceptionally be carried-forward for maximum 2 years. This rule applies for both Belgium personal tax and corporate tax purposes.
The investment deduction is a Belgium tax incentive that can be considered as low hanging fruit as the conditions and formalities to benefit from it are very much manageable. Taxpayers are thus strongly encouraged to make maximum use of the corona investment deduction.