Tony Bulcaen, Innovation performance director at Ayming
“It’s never too early to apply for the Innovation Income Deduction. Some companies may be hesitant to begin a feasibility study due to low revenues, or minimal to no taxable income. However, any yearly gross innovation income that is not captured is forever lost.
Additionally, any unused tax deduction can be carried forward indefinitely both in terms of timing and value. These are compelling reasons for any innovative company looking to optimize their innovation income”
1. Innovation Context in Belgium
The Industrial Sector’s Shift to Digitization
Over the past decade, the industrial sector has undergone a significant transformation, evolving from traditional hardware-driven models to embracing digitization.
This shift has propelled industrial companies to invest heavily in software and data analytics to meet these new demands and stay competitive in an increasingly digital world.
From Hardware to AI-Powered Software
As the industrial sector embraced the digital age, companies made large investments to become leaders in software and analytics. Traditional hardware systems were no longer enough; to stay competitive, companies began integrating data-driven solutions into their operations.
Today, the rise of artificial intelligence (AI) has taken the industrial world by storm, with 92% of organizations now prioritizing AI-powered software in their investment strategies. AI is now at the heart of industrial innovation.
2. Belgium Innovation Income Deduction
Belgium’s Support for Industrial Innovation
Recognizing the need to support industries in their digital transformation, the Belgian government introduced a series of financial incentives. Starting from 2018, Belgium’s Innovation Income Deduction (IID) scheme has allowed companies to benefit from an effective corporate tax rate of just 3.75% on revenues generated from innovative software.
This tax incentive encourages businesses to invest in AI-driven software and digital solutions, accelerating the country’s industrial evolution and enabling Belgian companies to remain competitive on a global scale.
Broad Scope of Belgium’s Innovation Income Deduction Scheme
What makes the IID scheme particularly attractive is its broad scope. The scheme applies to a wide range of innovative software solutions that enhance internal operations and boost productivity. Companies can take advantage of this tax relief to fund projects that:
- Strengthen cybersecurity
- Optimize supply chain and resource consumption
- Automate production processes
- Predict equipment maintenance to avoid costly downtime
Patents and the IID Scheme: Leveraging Intellectual Property for Tax Benefits
Another key feature of the IID scheme is that it allows companies to benefit from their patents. Even if a company holds only the usage rights or licenses for a patented technology, it can still qualify for the IID as long as it continues to invest in R&D efforts and integrates the patented technology into its operations.
3. Navigating IID Complexity
Complex, but Beneficial: Navigating the IID Scheme
While the Innovation Income Deduction scheme offers significant financial advantages, it can be complex to navigate. Calculating the tax benefits involves intricate accounting processes, especially when dealing with “embedded software” or royalties generated from software or patents used strictly for internal purposes.
Expert Guidance to Optimize Your IID Benefits
Navigating the complexities of the IID scheme can be challenging, but you don’t have to do it alone. Our team of tax experts is here to help you maximize your benefits. From optimizing your tax position to ensuring you meet all legal requirements, we provide comprehensive support to ensure that you get the most out of your innovation efforts.
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