Reform of the Belgian Investment Deduction

On 29 February 2024, the Belgian Council of Ministers introduced a bill in Belgian Parliament on the amendment of the Belgian investment deduction regime. Under the new regime, companies and self-employed individuals subject to Belgian income tax can get an additional tax deduction on investments in certain asset categories. The investment deduction regime was introduced over 40 years ago and the existing version is no longer suitable for the current climate policies and economic context.

The bill aims to streamline the procedural formalities to claim the investment deduction. It also attempts to incentivise the transition towards green investments. The new regime will apply to investments made as of 1 January 2025 and consists of three “tracks”:

• The ordinary investment deduction of 10% (or 20% for digital investments) for SMEs and self-employed individuals.
• The thematic investment deduction of 40% for SMEs and self-employed individuals and 30% for other companies.
• The technology deduction of 13.5% (or 20.5% in case of a staggered deduction).

Some existing investment deductions will remain in place, such as for investments in qualifying sea-going vessels.

The deduction will be calculated as a percentage of the acquisition value of the investment. The existing rules regarding the carry forward of unused investment deduction will be retained. And some specific types of assets are excluded, such as (most) passenger cars, assets with a depreciation period of less than three years and assets that are not exclusively used by the taxpayer or for the taxpayer’s professional activities.

The ordinary investment deduction

Under the proposed rules, the ordinary investment deduction solely applies to SMEs and self-employed individuals and the standard rate is 10% (as opposed to 8% under the existing rules). The ordinary investment deduction can be claimed for investments made in assets that are used for the economic activities of the taxpayer. It cannot be claimed for investments with a negative impact on the climate and environment, except if no economically comparable carbon emission-free alternative exists. The Belgian government will issue a list of excluded investment types.

The standard 10% rate can be doubled to 20% for investments made in “digital fixed assets.” The explanatory memorandum mentions software and hardware supporting digital payment and billing systems, digital accounting, CRM and e-commerce platform systems, and systems for the securitization of information and communication technology (eg certain investments required to implement the VAT B2B e-invoicing obligation applicable as from 2026).

The ordinary investment deduction can be claimed without any procedural formalities, other than completing forms 275U (for companies) and 276U (for individuals) (which must be filed with the income tax return).

The thematic investment deduction

Under the proposed rules, a thematic investment deduction will replace the existing specific categories of qualifying investments. The thematic investment deduction of 40% for SMEs and self-employed individuals and 30% for other companies will be applicable to investments made in one of these categories:

• efficient energy consumption and renewable energy
• carbon-free transport
• environmentally friendly investments
• supporting digital investments related to the three previous types of investments

For each of these categories, the Belgian government will publish a list of eligible investments. This list will be updated every three years.

To benefit from the deduction, the taxpayer must attach a certificate to its tax return from the competent (regional) government body. The certificate confirms that the investment was made in eligible assets which do not cause unreasonable harm to the environment. In this respect, the draft bill refers to the European “do no significant harm” test. This will significantly increase the administrative burden for the taxpayer.

The technology investment deduction

Finally, a “technology investment deduction” will be introduced for environmentally-friendly investments made in research and development (R&D) and investments made in patents. This investment deduction basically corresponds with the already existing investment deduction for R&D and for patents, but the rates are slightly amended. Under the existing investment deduction for R&D, the rate for environmentally-friendly investments in R&D was 15.5% for the one-off investment deduction and 22.5% for the staggered investment deduction (assessment year 2025). The rates will now be reduced to 13.5% and 20.5% respectively.

Key takeaways

For investments made from 1 January 2025, a simplified and more transparent investment deduction regime will apply, assuming that the bill is adopted in the Belgian Parliament. The new regime focuses on green and digital investments and aims to accelerate the transition towards an emission-free economy. Some (non-environmentally-friendly) assets will no longer qualify for the investment deduction.

The rate of the ordinary investment deduction will be increased from 8% to 10% and increased rates are also foreseen for some categories of environmentally-friendly investments (up to 30% or 40% for SMEs). In return for the increased rates under the thematic investment deduction, the Belgian federal government’s proposed bill will place a significant administrative burden on the taxpayers.

Taxpayers who are thinking about investing in environmentally-friendly assets should assess their position under both the existing and the proposed rules. Depending on the circumstances, investors might want to postpone an investment to 2025, to benefit from the increased thematic investment deduction.

The bill has not been adopted yet and the benefits of this updated investment deduction regime will largely depend on the list of qualifying investments. We will closely monitor further developments in this respect.

If you’d like further information or assistance, or if you’d like to keep up to date with developments of the bill in the Belgian Parliament, please contact one of the lawyers listed below.