Investment deduction: new rules since 1 january 2025

The Federal legislator reformed the Belgian Investment Deduction (ID) regime through the Act of 12 May 2024 containing various fiscal provisions (Dutch/French). This new regime has been in effect since 1 January 2025 and applies to fixed assets acquired or created from that date.

In support of this reform, the Federal Government issued two Royal Decrees on 20 December 2024, published on 30 December 2024 (Dutch/French)(hereafter, "RD 1") and 31 December 2024 (Dutch/French) (hereafter, "RD 2"), addressing previously missing elements such as the new lists of eligible and excluded investments and the detailed formalities to be respected.

Below, we provide a concise overview of both the old and new regimes, their respective conditions, and the interplay between the partial wage withholding tax ("WHT") exemption for R&D and the new ID regime.

Old ID regime: complex set of qualifying investments and annually changing rates

The ID aims to encourage business investments by allowing deductions from taxable profits based on the (acquisition or investment) value of new fixed assets or the annual depreciation. The old regime applied to new tangible and intangible assets (excluding certain items like cars), solely used for business in Belgium, provided that their depreciation was spread over at least 3 taxable periods.

Small companies and qualifying individuals could benefit from an ordinary one-off ID at 8%, and an increased ID applied for specific investments (e.g., regarding tax year 2025, 15,5% for patents). Besides, a spread ID amounting to 12.5% of the annual depreciation was available for small companies, with an increased rate of 22.5% for environmentally friendly R&D investments made by individuals or companies. These percentages took inflation into account and therefore varied from year to year. Excess deductions could generally be carried forward to subsequent taxable periods.

New ID regime: three categories of deductions

The reform of the ID regime was driven by a desire to update the outdated list of eligible investments, encouraging "green" investments and aligning it with today's sustainable transition needs, to enshrine the percentages in law, and streamline and simplify the applicable procedures and formalities.

The general application conditions, the transferability regime and excluded investments largely correspond to the old regime. The main changes relate to the qualifying assets and the applicable rates, which are fixed, unlike the old regime.

According to this new regime, a taxpayer can choose between three alternative categories of deduction for each qualifying asset:

Ordinary deduction

As for the old ordinary one-off ID, the ordinary deduction is only open to individuals and small companies. The deduction amounts to 10% of the asset's acquisition value and an increased rate of 20% applies for qualifying investments in certain digital fixed assets. The list of eligible digital fixed assets, as set out in RD 2, includes investments in systems for digital payment and invoicing, ICT security, accounting and financial management, customer acquisition, digital management of contractual and commercial relationships and supplementary investments useful for the implementation of any of the foregoing investments.

The deduction can however not be claimed for fixed assets based on or using environmentally and climatically harmful substances unless no economically comparable carbon emission-free alternative exists. The categories of excluded investments include the following: fossil fuel-related assets; assets using fossil fuels for electricity or heat production, or propulsion; pesticide production assets; deep-sea mineral extraction assets; assets involving harmful substances; prohibited fishing method assets; assets with negative environmental assessments; cross-border waste trade assets (except non-hazardous waste for recycling).

Increased thematic deduction

Subject to stricter conditions, the increased thematic deduction can be applied by both individuals and companies, with applicable rates amounting to 40% (of the acquisition value) for individuals and small companies, and 30% for other companies.

This deduction only applies to investments made in one of the following categories: (i) efficient energy consumption and renewable energy, (ii) carbon-free transport, (iii) environmentally friendly investments and (iv) supporting digital investments related to any of the three aforementioned categories of investments.

For each category, except for the digital support investment list (which is yet to be established), an exhaustive list of eligible investments has been established through RD 2 and included in separate Annexes to the Royal Decree implementing the Belgian Income Tax Code 1992. These lists will be updated every three years.

The energy investment list includes categories like energy loss reduction, energy recovery and sharing, and renewable energy production. The transport investment list covers, amongst others, as regards rail transport, investments in shunting locomotives; as regards road transport, investments in emission-free vehicles and infrastructure for active mobility; and, as regards sea and inland navigation, investments in ships and vessels to reduce CO₂ emissions and improve energy efficiency. The environmental investment list includes investments relating to resource management and climate impact reduction.

These lists are extensive and detailed, requiring individual review to determine eligibility. However, all lists specify that investments with a fiscal benefit exceeding EUR 30 million require prior EU Commission approval and investments valued at less than EUR 1,000 are excluded.

To apply the increased thematic deduction, the taxpayer must obtain a certificate from the competent Region or federal minister, as applicable, and include it with their income tax return. The RD 1 outlines the procedure for requesting such certificate, which must be done in writing or electronically within three months after the end of the taxable period in which the fixed assets were acquired or created.

Technology deduction

The "technology deduction" corresponds to the old ID regime for patents and environmentally friendly investments in R&D.

As regards the one-off ID for said investments, the applicable rate is 13,5%, while a rate of 20,5% applies for the spread deduction for environmentally friendly investments in R&D.

A certificate proving the environmentally friendly nature of the investment, issued by the competent government authority, must be attached to the taxpayer's income tax return for the taxable period during which the relevant assets are acquired or created.

R&D partial wage WHT exemption and the new ID

Under the old ID regime, the R&D partial wage WHT exemption, allowing certain employers to keep 80% (or 40% for bachelor degrees) of the wage WHT on salaries of researchers (and thus not remit it to the Belgian tax authorities), did not affect the ID. Indeed, the total wage WHT could be included as a personnel cost capitalized on the balance sheet serving as basis for the ID calculation, ignoring the exemption. As a result, the employer could benefit from both the wage WHT exemption and a higher calculation basis for the ID.

To prevent this double advantage, it is now required that, if the total wage WHT is included in the acquisition value of the fixed asset for which the ID is applied, the non-remitted part is deducted from the calculation basis.

Conclusion

The reform of the Belgian ID regime introduces a modernized and streamlined system aimed at promoting green and sustainable investments. The new regime features fixed rates and three categories of deductions, with specific lists of qualifying assets for energy, transport, and environmentally friendly investments, updated every three years. While the reform simplifies procedures, it also imposes stricter conditions and additional administrative burdens.

Finally, the government has ended the double benefit that could previously arise from the application of both the wage WHT exemption and the ID, by adjusting the latter's calculation basis.