New tax heaven for innovation?
Brussels – The Belgian government is seeking to foster corporate investment in technological innovation with tax breaks. A new law that has come into effect this year will grant patent owners tax exemptions on 80% of their patent income in Belgium. Under the new law, the maximum effective tax rate on patent income for any company that has done R&D in a research centre – either in Belgium or abroad – will be 6.8%. Ivo Onkelinx, a tax partner with the international law firm Linklaters in Brussels, said that the measure was “very straightforward” and will be “especially interesting for start-up companies”. Brent Springeal from Freshfields Bruckhaus Deringer stated that the tax deduction makes Belgium one of the best places to develop and license intellectual property – especially in the life sciences. The new law is applicable not only to income from license patenting, but also to income from the sale of goods produced or services provided by the Belgian company or branch that directly holds the patent used for the production or service.
For instance, a pharma distributor that has developed a new patented production method that enhances the product’s properties and justifies a higher reimbursement price will profit from the tax deduction – even if he does not receive royalties. Indeed, a part of the price of the enhanced product is seen as a royalty paid by the consumer, and is therefore applicable to the new law. However, all patents must be developed by a Belgian company. Inlicensed products must be improved by the Belgian company that claims for the tax deduction.