FI Group Belgium consists of a team of expert consultants to support your innovative projects. With their expertise in fiscal matters, our consultants help you discover incentives such as the Partial Wage Withholding Tax Exemption for Researchers. But how does this apply to smaller innovators that want to invest in R&D? How do Young Innovative Companies relate to this tax incentive?
What is a Young Innovative Company, YIC?
‘Young innovative company’ (YIC) status was introduced to encourage people to set up and expand SME’s that carry out R&D.
A YIC is an enterprise which carries out research projects and which, at the end of the taxable period preceding that of the payment or attribution of the remuneration, simultaneously fulfils the following conditions:
It is a small (or medium-sized) company, i.e. a company that for the last closed financial year did not exceed one of the following limits:
The average number of employees does not exceed 50;
Its annual turnover excluding VAT does not exceed 7,300,000 euro;
the balance sheet total does not exceed 3,650,000 euro;
It is a small and young company, i.e. it was set up less than 10 years before 1 January of the year in which the exemption from the payment of withholding tax is granted;
It was not set up as part of a concentration, restructuring, expansion of an earlier activity, or takeover of such an activity;
It has incurred research and development expenses that represent at least 15% of the total amount of the expenses of the previous taxable period.
Due to the nature of the status, YIC’s are small businesses.
Exemption from payment of payroll tax for researchers
When speaking of the Partial Wage Withholding Tax Exemption (WWT), YIC’s fit into a special category: YIC’s that pay or award salaries to the scientific staff they employ will also be able to benefit from this tax incentive.
FI Group’s consultants have the knowledge and the expertise to support you within this tax incentive, among others, by administrative notification to the mandatory institutions, requesting the necessary (regional) certificates, forms and claims, modify the necessary documents, applying support measures and corrections where possible.
The WWT explained
Belgian private companies and public institutions can profit from several tax incentives and fiscal schemes. These affect both your taxable income and tax return.
Within the WWT incentive, up to 80% of the withholding tax on professional income can be recovered by a company. Within this enterprise tool, the following needs to be considered:
A specific degree (starting from bachelor)
Involved in R&D-activities
Employers from the private sector and knowledge institutions are exempted from remitting 80% of the withholding tax due on the wages of researchers they employ to the tax authorities.
Since 2018, this measure has been extended to several bachelor’s degrees.
Since 2020, an exemption of 80% of the withholding tax due and limited to 50% of the total amount of the exemption as applied for employees with a specific master’s and/or doctor’s degree for small companies also applies to these bachelor’s degrees.
For the other companies, this is limited to 25% of the total amount of the exemption as applied for employees with a specific master and/or doctorate degree.
The special status of YIC within the WWT
The WWT applies to companies engaged in economic activity, which pay or grant remuneration to researchers with a doctorate or a degree in civil or industrial engineering. A deviation from the diploma level is possible by YIC’s in the following situations:
Young Innovative Companies that collaborate on a project basis with universities and other non-profit research organisations: for these researchers the 80% reduction can be applied pro rata to the research activities.
Young Innovative Companies employing scientific personnel (researchers, research technicians, research and development project managers). This exemption is not possible for administrative or commercial personnel.
What type of R&D qualifies?
Research or development projects or programs are projects or programs that have the following objective:
Fundamental research: theoretical activities mainly carried out for the purpose of acquiring new knowledge, without being intended for direct practical application;
Industrial research: critical research aimed at acquiring new knowledge and skills with a view to developing new products, processes or services, or to significantly improving them. It includes the manufacture of parts of complex systems, which is necessary for industrial research, for the validation of general technologies, except for prototypes;
Experimental development: the acquisition, combination, design and use of existing scientific, technical, business and other knowledge and skills for plans, schemes or designs of new, modified or improved products, processes or services. This may also include the conceptual formulation and design of alternative products, processes or services and the recording of information about them. These activities may also include the creation of designs, drawings, plans and other documentation, provided they are not intended for commercial use.
The size of the support
The aid consists of exempting employers from paying a certain percentage of the advance payment due on the above-mentioned degrees to the tax authorities.
To further encourage you to invest in R&D+I, our FI Group consultants help identify, implement and maintain the necessary financial processes. We support you in understanding and intercepting the available R&D+I opportunities.