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9 FEBRUARY 2017. - An Act to introduce a Innovation Income Deduction

PHILIPPE, King of the Belgians,
To all, present and to come, Hi.
The House of Representatives adopted and sanctioned the following:
PART 1^er - General provision
Article 1^er. This Act regulates a matter referred to in Article 74 of the Constitution.
PART 2. - Amendments to the Income Tax Code 1992
Art. 2. In Article 46, § 2, paragraph 1^er, from the Income Tax Code 1992, last amended by the Act of December 26, 2015, the words "tax income deductions, innovation income deductions," are inserted between the words "Amortizations," and the words "investment deductions, research and development tax credits".
Art. 3. In title III, chapter II, section III, of the same Code, a sub-section VI is inserted, as follows:
"Subsection VI - Income from exempt innovation.".
Art. 4. In title III, chapter II, section III, subsection VI, of the same Code, inserted by section 3, it is inserted an article 194quinquies, as follows:
"Art. 194quinquies. § 1^er. For the taxable period during which the application for an intellectual property right referred to in Article 205/1, § 2, 1°, (a) to (d), is still in progress, 85 p.c. of the amount that would be fixed in accordance with Article 205/3 in the event that the intellectual property right is already granted, is not considered to be a benefit within the limits and conditions set out below.
By taxable period, exemptions referred to in paragraph 1^er shall be granted in a limited amount to the profits of the taxable period, as they remain before the application of sections 205/1 to 205/4, and before the establishment of the exempt reservation referred to in paragraph 1^er.
In the event of absence or insufficiency of profits referred to in paragraph 2, allowing for exemptions, exemptions not granted for that taxable period shall be deferred successively on the profits of the following taxable periods, without the exemptions to exceed the limit referred to in paragraph 2.
The exempt reserve shall be maintained only if it is satisfied with the conditions referred to in section 190, paragraph 2.
§ 2. The amount temporarily exempted in accordance with § 1^er relating to an intellectual property right is permanently exempted from the taxation year that relates to the tax period in which that intellectual property right is granted.
The remaining amount of exemptions not granted, after application of § 1^er, paragraph 3, of the preceding tax period, is permanently exempted for the taxation year that relates to the tax period in which that intellectual property right is granted, limited to the limit amount referred to in § 1^erParagraph 2.
In case of absence or insufficiency of profits as referred to in § 1^er, paragraph 2, in order to be able to apply the exemption referred to in paragraph 2, the exemptions not granted for that taxable period shall be carried forward in accordance with § 1^er, paragraph 3, to the following taxable periods.
§ 3. Previously exempt benefits relating to intellectual property rights are considered to be profits from the taxable period in which the application relating to this intellectual property right is no longer in progress and in which the intellectual property right has not been granted.
§ 4. In order to benefit from the exemption under this section, the taxpayer is required to attach a statement in accordance with the model established by the Minister of Finance or his delegate, to the tax return on income from the taxation year in respect of the tax period during which the application for an intellectual property right is made, up to the taxation year in respect of the tax period from which the application is no longer in progress. ".
Art. 5. In title III, chapter II, section IV, of the same Code, the title of subsection IIIbis, inserted by the Act of 27 April 2007, is replaced by the following:
"Subsection IIIbis. - Deduction for innovation income.".
Art. 6. In subsection IIIbis of title III, chapter II, section IV, of the same Code, an article 205/1 is inserted as follows:
"Art. 205/1. § 1^er. The profits of the taxable period are reduced by 85 p.c. of amounts fixed in accordance with section 205/3. This reduction is called "Innovation Income Reduction".
In the event of absence or insufficiency of profits to fully apply the innovation income deduction for that taxable period, the party that could not be deducted, may be deferred to subsequent taxable periods.
§ 2. For the purposes of this subsection,:
1° Intellectual property right: the rights referred to below which the company is full owner, owner, owner, owner or owner of licences or rights:
(a) a patent or additional protection certificate; or
(b) a right to obtain a plant whose application is filed not earlier than 1^er July 2016 or, in the case of a right to obtain acquired plant, which is acquired after June 30, 2016; or
(c) an orphan drug, limited to the first 10 years of its registration as such in the European Register of Orphaned Drugs, and whose application is filed as early as 1^er July 2016 or, in the case of an acquired orphan drug, acquired after June 30, 2016; or
(d) the exclusiveness of data or trade exclusivity attributed by the public authorities after June 30, 2016 pursuant to:
- Article 59 of Regulation (EC) No. 1107/2009 of the European Parliament and of the Council of 21 October 2009 concerning the marketing of phytopharmaceutical products and repealing Council Directives 79/117/EEC and 91/414/EEC;
- Article 14.11 of Regulation (EC) No. 726/2004 of the European Parliament and of the Council of 31 March 2004 establishing community procedures for authorisation and monitoring of drugs for human use and veterinary use, and establishing a European Agency for Drugs;
- articles 10.1, 10.5 or 74bis of Directive 2001/83/EC of the European Parliament and of the Council of 6 November 2001 establishing a Community Code on Human Drugs;
- articles 13.1, 13.5 or 13 bis of Directive 2001/82/EC of the European Parliament and of the Council of 6 November 2001 establishing a Community Code on Veterinary Drugs;
- Article 8 of Regulation (EC) No. 141/2000 of the European Parliament and of the Council of 16 December 1999 concerning orphan drugs;
- similar provisions of national or international law, limited to the first 10 years of exclusive data or commercial exclusivity; or
e) a computer program protected by copyright, including a derivative or adaptation creation from an existing computer program, resulting from a project or program, research or development, referred to in section 275³, § 3, and which has not already generated revenue before 1^er July 2016;
2° innovation income to be taken into account: the revenues below, which when there is special relations between the royalty debtor and the beneficiary corporation, are taken into consideration only to the extent that they are not higher than those that would have been agreed between unrelated companies:
- royalties of licence, to the extent that these royalties are found in the taxable income in Belgium of the taxable period;
- royalties that would be payable to the corporation for the taxable period if the property produced by or on behalf of the corporation or services presumed by or on behalf of the corporation were produced or presumed by a third party under a licence granted by the corporation and to the extent that such royalties would be in the taxable income in Belgium of the taxable period;
- royalties that would be payable to the corporation for the taxable period if the production process, bound indivisibly to the rights referred to in the 1st and followed by or on behalf of the corporation, was followed by a third party under a licence granted by the corporation and to the extent that such royalties would be in the taxable income in Belgium of the taxable period;
- compensation payable to the corporation, either on the basis of a judicial or arbitral award, or on the basis of a friendly agreement, or on the basis of an insurance contract, following the violation of an intellectual property right, and to the extent that such compensation is directly related to the intellectual property right and is in the taxable income in Belgium of the taxable period;
- amounts obtained in connection with an alienation of an intellectual property right that has the nature of an asset and is constituted at the latest during the previous tax period, or is acquired in the past 24 months;
3° Net income: the gross amount of innovation revenues, reduced the expenditures referred to in the 5° charge, made or borne during that taxable period, and that are not less than the costs that would have been applicable between unrelated enterprises;
4° Qualifying expenditures: research and development expenses that relate directly to an intellectual property right referred to in 1°, excluding interest, land and buildings expenses, as well as other expenses that do not relate directly to intellectual property rights, and that are made by the company for research and development activities carried out by the company itself, or are paid by the company:
- an unrelated business; or
- a related company, provided that the company pays the rewards obtained without margin to an unrelated company;
5° overall expenditures: the total:
- Qualifying expenditures referred to in 4°; and
- expenses for the acquisition of the intellectual property right referred to in the 4th, excluding interest and other expenses that do not relate directly to intellectual property rights; and
- research and development expenses that relate directly to the intellectual property right referred to in the 4th, excluding interest, land and buildings expenses, as well as other expenses that do not relate directly to the intellectual property right, which are made to a related business, excluding the expenses referred to in the 4th, second dash;
6° a related company: a company in respect of which the company is located directly or indirectly in interdependence links;
7° an unrelated business: a company in respect of which the company is not directly or indirectly in interdependence. ".
Art. 7. In the same subsection IIIbis, an article 205/2 is inserted as follows:
"Art. 205/2. § 1^er. To determine the innovation income deduction for a taxable period, the innovation income to be considered is the portion of the net income that is attached exclusively to an intellectual property right.
The determination of innovation revenues as referred to in paragraph 1^er, must be carried out separately by intellectual property law. If the corporation may claim the exemption referred to in Article 205/4, § 1^er, paragraph 2, it may determine innovation revenues, either by type of product or service, or by product or service group.
If the determination of innovation revenues results in a negative result, this negative result is deducted successively from the net innovation revenues of either the same intellectual property right or the same type of product or service, or the same group of products or services of each of the following tax periods.
§ 2. For the taxable period for which innovation revenues are determined separately in accordance with § 1^er for the first time, this amount is reduced from the total expenses claimed in fees, in prior tax periods ending after June 30, 2016 and which are not already deducted for the determination of the exemption referred to in section 194quinquies. Expenses incurred or incurred during a taxable period during which the corporation applied the patent income deduction in accordance with sections 205¹ 205⁴, as they existed before being repealed by sections 4 to 7 of the Act of August 3, 2016 dealing with urgent tax provisions relating to either this right of intellectual property, that type of product or service, or that group of products or services, must not be deducted.
After application of paragraph 1^er, the potential negative result is deducted successively from net innovation revenues relating to either the same intellectual property right or the same type of product or service, or the same group of products or services of each of the following taxable periods.
Derogation from paragraph 1^er, the corporation may, during the taxable period for which innovation revenues are for the first time determined separately in accordance with § 1^er, irrevocably opt for linear spreading of expenditures referred to in paragraph 1^er for a maximum period of seven consecutive taxable periods.
For the taxable period in which the specified period referred to in paragraph 3 expires or, possibly earlier, if the innovation income deduction in respect of either that intellectual property right or that type of product or service, or that group of goods or services is no longer applied, the benefit of the taxable period is increased by an amount equal to the positive difference between the opted or deferred innovation income deduction for that taxable period and
In addition, where the innovation income deduction in respect of either this intellectual property right, that type of product or service, or that group of products or services, continues to be applied after the expiry of the period referred to in paragraph 4, the balance of expenditures referred to in paragraph 1^er that would not have been deducted if the taxpayer had not opted for the linear calibration method referred to in paragraph 3, would continue to be deducted in accordance with paragraph 2 in the following tax periods. ".
Art. 8. In the same subsection IIIbis, an article 205/3 is inserted as follows:
"Art. 205/3. § 1^er. Innovation revenues determined separately in accordance with section 205/2 are multiplied by a fraction of which:
- the numerator is equal to the qualifying expenditures made during the taxable period and the previous tax periods relating either to intellectual property rights or to the type of product or service, or to the group of products or services resulting from these innovation revenues. Then the figure thus obtained can be increased by 30 p.c., to the maximum the number of the denominator;
- the denominator is equal to the overall expenditures made during the tax period and the previous tax periods, relating either to intellectual property rights or to the type of product or service, or to the group of products or services resulting from these innovation revenues.
For the 2019 and prior taxation years, by derogation from paragraph 1^er, the innovation revenues determined separately in accordance with Article 205/2, are, as long as the availability of the evidence in accordance with Article 205/4, § 1^er, could not be performed at least for three successive tax periods, multiplied by a fraction of which:
- the denominator is equal to all expenses in respect of research or development projects or programs as referred to in section 275³§ 3, which are made during that taxable period and during one of the two preceding taxable periods;
- the numerator is equal to the number of the denominator excluding expenses for the acquisition of an intellectual property right and expenses constituting retributions to a related business, except to the extent that these retributions are paid without margin to a company not bound by the related company. Then the figure thus obtained can be increased by 30 p.c., to the maximum the denominator number.
From the taxable period in which a corporation that, during the preceding taxable periods, applied the relative portion either to the intellectual property right or to the type of product or service, or to the group of products or services referred to in this section on the basis of the method referred to in paragraph 2, in accordance with section 205/4, § 1^er, may retain evidence relating to either the intellectual property right, the type of product or service, or the group of goods or services for three successive taxable periods, and no later than the 2020 taxation year, the fraction shall be determined on the basis of paragraph 1^er and is limited to expenditures that were made during the first taxable period for which the corporation could keep available the evidence relating to either intellectual property rights, the type of product or service, the group of goods or services, and the subsequent taxable periods.
§ 2. By derogation from § 1^er, the corporation may determine the fraction by which the innovation revenues determined separately in accordance with section 205/2 are multiplied, on the basis of the proportion of the added value of the research and development activities carried out by itself in all research and development activities, relating to either an intellectual property right or to a type of product or service, or to a group of products or services, under the following conditions:
- the fraction determined in accordance with paragraph 1^erParagraph 1^er or 2, is at least 25 p.c., before application of the increase of 30 p.c.;
- the company demonstrates that the fraction determined in accordance with paragraph 1^erParagraph 1^er or 2, does not correspond to the added value of the research and development activities carried out by itself in proportion to all research and development activities, relating either to intellectual property rights or to a type of product or service, or to a group of products or services, due to exceptional circumstances.
The corporation shall provide each year proof that the conditions referred to in paragraph 1^er are always accomplished.
Paragraph 1^er applies by early decision in accordance with the Act of 24 December 2002 amending the corporate income tax system and establishing an early tax decision system. ".
Art. 9. In the same subsection IIIbis, an article 205/4 is inserted as follows:
"Art. 205/4. § 1^er. The taxpayer shall make available to the administration the evidence allowing by intellectual property law to establish:
- the real value of acquired intellectual property rights of a related company from which intellectual property law originates;
- the innovation revenues referred to in Article 205/1, § 2, 2°, which relate exclusively to intellectual property rights;
- costs that are deducted from innovation revenues to arrive at the net revenues referred to in Article 205/1, § 2, 3°;
- expenses referred to in Article 205/1, § 2, 4°, which relate directly to intellectual property rights;
- the expenses referred to in Article 205/1, § 2, 5°, charges that relate directly to intellectual property rights.
When the company can demonstrate that the establishment of achievable intellectual property rights innovation income from a practical perspective, it can establish innovation revenues, either by type of product or service, or by group of products or services, that result from intellectual property rights.
§ 2. The King shall determine the terms and time of the obligation referred to in § 1^er.
§ 3. In order to justify the benefit of the innovation income deduction, the taxpayer must attach to its tax return an income tax statement whose model is determined by the Minister of Finance or his or her delegate for each taxation year for which:
- either, the innovation income deduction is applied;
- the time limit for the linear spread method referred to in Article 205/2, § 2, paragraph 2, chosen in a previous tax period, is not already expired unless the Innovation Income Deduction for either this intellectual property right, that type of product or service, or that group of products or services is no longer applied;
- the period of employment referred to in § 5, following the alienation of an intellectual property right in a previous taxable period, is not already expired.
§ 4. If the corporation applies the patent income deduction in accordance with section 543, sections 205/1 to 205/4 shall not apply for that taxable period and for the following taxable periods that close before 1^er July 2021, concerning the patent for which the patent income deduction is applied.
§ 5. When the corporation has not assigned to any expenses referred to in section 205/1, § 2, 4°, relating to one or more other intellectual property rights as referred to in section 205/1, § 2, 1°, the amounts obtained on the occasion of the alienation of an intellectual property right referred to in section 205/1, § 2, 2°, fifth shall be taxed, within a period of five years taking place on the first day of the alien ".
Art. 10. In section 212, paragraph 1^er, of the same Code, last amended by the law of December 11, 2008, the words "tax income deductions, innovation income deductions," are inserted between the words "research and development tax credits," and the words "risk capital deductions".
Art. 11. In article 229, § 4, paragraph 5, of the same Code, inserted by the law of December 11, 2008 and last amended by the law of December 13, 2012, the words "deductions for patent revenues, deductions for innovation income," are inserted between the words "tax credits for research and development," and the words "deductions for capital at risk".
Art. 12. In section 231, of the same Code, last amended by the Act of 12 May 2014, the following amendments are made:
1° in paragraph 2, paragraph 5, the words "tax income deductions, innovation income deductions," are inserted between the words "research and development tax credits," and the words "risk capital deductions";
2° in paragraph 3, paragraph 3, the words "tax income deductions, innovation income deductions," are inserted between the words "research and development tax credits," and the words "risk capital deductions".
Art. 13. Section 236bis of the same Code, repealed by the Act of 3 August 2016, is reinstated in the following wording:
"Art. 236bis. Sections 205/1 to 205/4 apply to taxpayers referred to in section 227, 2°, for innovation revenues related to intellectual property rights that are assigned to their Belgian institutions.
For the purposes of section 205/2, gross innovation revenues are reduced by the costs of specific activities for research and development, third-party remuneration, and depreciation on acquired intellectual property rights that are charged to the taxable outcome of Belgian institutions. ".
Art. 14. In section 286 of the same Code, last amended by the Act of 3 August 2016, the following amendments are made:
1° in paragraph 2, the words "Innovative incomes for which a deduction for innovation income is granted in accordance with Articles 205/1 to 205/4 or Article 236bis and" are inserted between the words "for" and the words "patent revenues for which";
2° in paragraph 3, the words "respectively these same innovation revenues that have benefited from a deduction for innovation income in accordance with sections 205/1 to 205/4 or 236bis and" are inserted between the words "tax on" and the words "the same patent revenues".
Art. 15. In section 416, paragraph 1^er, of the same Code, last amended by the Act of 25 April 2007, the words "or the taxable investment reserve under section 194quater, § 4" are replaced by the words "to the taxable investment reserve under section 194quater, § 4, or to amounts that become taxable under section 194quinquies, § 3".
Art. 16. This Act produces its effects on 1^er July 2016.
Given in Brussels, 9 February 2017.
PHILIPPE
By the King:
Minister of Finance,
J. VAN OVERTVELDT
State seal:
Minister of Justice,
K. GEENS
____
Note
(1) House of Representatives (www.lachambre.be)
Documents: K54-2235