Partial exemption wage withholding tax for R&D: Belgian Court of Cassation issues surprising ruling

Administrative position before Supreme Court decision

Until recently, the administrative position was clear: the wage withholding tax exemption can only be applied from the month in which the project or program was notified to BELSPO and has no retroactive effect to the period preceding the notification.

This means that the wage withholding tax exemption could be applied at the earliest from the moment of registration of the project in BELSPO.

 

Ruling of the Court of Cassation

With its decision of 6 January 2023, the Court of Cassation adopted a stricter position regarding the time of notification, being that the notification must be done prior to the project's start date.

In practice, this means that a project must be registered before the project is effectively started within the company. Consequently, according to this ruling, projects that have already been started cannot be notified retrospectively, meaning that the wage withholding tax exemption cannot be applied at all to the project.

 

Circular of 27 April 2023 adjusts administrative position

Given the clear position of the Court of Cassation, the administration needs to change their position regarding the time of notification. Specifically, it was decided to continue applying the administrative position taken until now until 31July 2023. From 1 August 2023, the administrative position will then follow the stricter position of the Court of Cassation and R&D projects must be notified before the project starts.

 

Specifically, what will change?

Project notifications until 31 July 2023

For projects or programs that already existed the R&D withholding tax exemption can be claimed from the moment of notification (provided all formalities have been fulfilled). However, there is no retrospective effect for application of the exemption from transferal of withholding tax.

Example: Company X starts up project Z on 1 January 2023. On 1 July 2023, the project is already 6 months in progress and the project is notified in BELSPO with start date 10 July 2023. The company will be able to claim the exemption from July 2023 until when the project end date has passed.

Project notifications as from 1 August 2023

Project notifications must be made before the effective start date of the project. Projects that already existed before but would only submit their notification after 1 August 2023 can no longer claim the exemption for the R&D work its employees spend on those particular projects.

Example 1: Company X commences project Z on 1 January 2023. On 1 September 2023, the project is already 8 months in progress and the company wants to register the project in BELSPO and apply the partial exemption. As the project already started on 1 January 2023, the company can no longer claim the exemption for the time its employees spend on R&D activities on this project.

Example 2: company X starts up project Z on 1 September 2023. On 15 August 2023, the project is notified in BELSPO with a start date of 1 September 2023. The exemption can be applied from 1 September 2023. If company X were to register project Z on 15 September 2023, the exemption can no longer be applied as project has already started on 1 September 2023.