How can I benefit from the exemption from paying professional withholding tax?
Exemption from professional withholding tax / researcher
Like many European countries, Belgium strongly supports the growth of its businesses, particularly in Research and Development (R&D) and Innovation. Today, most companies have clearly understood the major challenge of standing out from their competitors through a constant search for differentiation in their products or services.
To this end, the legislator provides innovative companies of all sizes (startups, VSEs, SMEs, mid-caps, major accounts) a wide range of financial aid which sometimes fall under federal power, sometimes under regional power.
Despite this dense support ecosystem dedicated to innovation, it is still difficult for an industrialist to navigate this multitude of specific aids! EPSA Belgium experts help you understand the existing aids based on the progress of your projects in the short, medium, or long term.
In this article, EPSA Belgium presents a mechanism relating to the tax system, and therefore federal, which concerns the application of the partial recovery of the researcher’s withholding tax.
What is the exemption from paying professional withholding tax?
The exemption from payment of professional withholding tax is granted to small and large companies that pay or award remuneration to researchers engaged in R&D (research or development) projects or programs, and who have a doctoral or master’s degree of scientific qualification. It can concern up to a maximum of 80% of the withholding tax .
Noticed :
Since January 1, 2018, companies that apply the exemption from paying professional withholding tax can apply this exemption in the same way for researchers with a scientific/technical bachelor’s degree. An exception is however granted for start-ups with the status of “Young Innovative Companies ” (YIC) which can be granted an exemption regarding the level of diploma.
For these researchers, it is therefore possible to apply the 80% reduction in proportion to the research activities carried out by the company.
Well known to companies carrying out Research and Development operations, this public aid offers a certain number of implementation facilities but also includes rules which must be respected.
Indeed, numerous tax audits are carried out by the tax administration, which can lead to tax adjustments in the event that the eligibility of declared expenses is not sufficiently justified.
What is the reporting procedure?
1. Notification / Registration of the R&D project or program
- The application is made to the Federal Public Service for Programming of Federal Science Policy (electronic tool available on the BELSPO website). The company must identify the personnel benefiting from the (Pr. P) and describe the project(s) or program(s) where it is demonstrated by technical arguments that the purpose of the description is fundamental or industrial research or experimental development.
- Particular emphasis will be placed on the factual elements which demonstrate the innovative nature of the project, a key condition for access to this system.
2. Request for prior opinion from BELSPO
The BELSPO service is authorized to issue binding opinions regarding whether or not this exemption falls within the scope of application.
3. Administrative formalities for those liable for the (Pr. P)
- At regular intervals (minimum once a month), the introduction of a corrective declaration to (Pr. P) which indicates the amounts to be recovered by the beneficiary from the personnel concerned,
- Maintaining a nominal list containing a certain amount of information concerning eligible beneficiaries (information on profiles benefiting from the system on the BELSPO website).
Some key points to remember about this device
- Speed of implementation of the system and direct positive impact on the company’s cash flow, provided that the exemptions presented meet the eligibility criteria in order to avoid financial recovery in the event of a tax audit,
- No lower or upper limit on the amounts recovered, except for exemptions for Research staff with a bachelor’s degree,
- Great interest for technology start-ups which benefit from some flexibility in staff eligibility,
- Possibility of recovering sums over several previous tax years either by a claim or by regularisation,
- Involvement of two separate administrations in the system : on the one hand, the Scientific Policy which gives an opinion on the eligibility of the project registered on the platform and therefore of its “rightful holder” of the system, and on the other hand, the FPS Finance for application checks.
- Audits can occur several years after the start of the research. Carried out by the Ministry of Finance, they are increasingly numerous and therefore require the submission of a complete technical, administrative and financial file.
Our advice for declaring this device
To meet the administration’s requirements, it’s worth remembering the three-pronged approach to claiming this tax break: technical, administrative, and financial. Here are some tips from our EPSA Belgium experts to help you secure your application for assistance.
1/ Clearly justify the technical axis
- Appropriately justify the innovative research project or program with solid technical arguments,
- Update the technical developments of your projects and their impact on your Business Model,
- Identify precisely the staff in charge of projects or programs and clearly specify their activities,
- Update assignments and their activities,
- Update activity rates.
2/ Prepare the administrative axis well
- Keep a copy of each diploma of the staff concerned,
- Have employment contracts,
- Maintain all documents justifying your Research activities in detail,
- Hold detailed timesheets relating to eligible R&D projects,
- Request binding advice from BELSPO.
3/ Calculate the financial axis correctly
- Use the detailed pay slips to extract the applied withholding taxes,
- Correctly determine staff activity rates,
- Take into account diplomas (Master/Bachelor) for calculations.
Finally, it is important to demonstrate the consistency between your strategic activities (core business) and your Research and Development (R&D) activities.
What can EPSA Belgium do to make your procedures easier?
Thanks to our expertise in obtaining tax arrangements, our experts take care of your entire application process for exemption from paying professional withholding tax, from the audit of your projects to support in the event of a tax audit
The EPSA Belgium methodology :
- Identify your eligible projects within the meaning of BELSPO using a pre-screening method,
- Build a solid technical argument that contributes to a positive assessment from reviewers,
- Prepare and write the complete administrative file,
- Update R&D projects and their progress, with possible reorientation,
- Deploy an IT solution for easy time recording, using an internal EPSA monitoring tool developed by our teams,
- Calculate in detail the amounts of exemptions per month/quarter/semester,
- Calculate potential recoveries from previous years,
- Support you during a possible tax audit by the administration.