Investment deduction

As from 1 January 2025, the new investment deduction regime has entered into force. Within the context of this new regime, two Royal Decrees have been published in the Belgian Official Gazette during the last days of 2024 including the long-awaited lists of investments that qualify for, or are excluded from, the new investment deduction regime.

For a general overview of the new regime we refer to our previous article: Reformed Investment Deduction Takes Effect in 2025 - KPMG Belgium

The qualifying investments as determined by one of the two Royal Decrees can be summarized as follows: 

Basic deduction

The basic deduction (of 10%) is exclusively available for natural persons and small companies. To qualify for the basic deduction, investments must meet the general conditions for the investment deduction (as already applicable under the old regime), which specify that:

• The investment must involve new tangible fixed assets or new intangible fixed assets.
• The assets must be used in Belgium for the exercise of professional activities.
• Exclusions outlined in the existing legislation continue to apply.

For investments in qualifying digital assets, an increased rate of 20% will apply. The Royal Decree provides the following list of assets qualifying for this increased basic investment deduction: 

• Registered cashier system
• Digital assets necessary for compliance with the General Data Protection Regulation (GDPR)
• Systems enabling the accounting and financial management of the business
• Digital assets for the purpose of client acquisition and the digital management of contractual and commercial relations

Thematic investment deduction

The thematic investment deduction foresees a general deduction of 40% for individuals and SMEs and 30% for other companies. To be eligible for the investment deduction, the investment must fall within one of the specified categories: (i) investments in efficient energy use and renewable energy, (ii) investments in carbon emission free transportation, (iii) environment-friendly investments and (iv) digital investments supporting the three previous categories. For each type of deduction, the eligible investments are indicated in an exhaustive list published by Royal Decree, which is updated every three years to reflect technological and policy advancements. For the moment, only the three first categories were detailed in the Royal Decree.

Note that the thematic investment deduction generally does not apply to fixed assets for which regional aid is requested. The precise application of this exemption in practice remains uncertain.

Investments in efficient energy use and renewable energy (included in the ‘Energy Investment List’)

For investments in efficient energy use and renewable energy, the following five categories are listed in the Royal Decree:

1. Reduction of energy losses: Reduction of energy losses in existing buildings, reduction of energy losses by isolating equipment, pipes, valves, and channels in use, covering hot or cold liquid baths in use or in existing ovens and limiting of ventilation loss in existing buildings. This covers a.o. insulation of roofs, walls, floors etc., that meet the specified technical requirements (and insofar as they are not already required by a legal or regulatory provision).
2. Recovery of energy and energy parts: Collection, recovery, and delivery to third parties of heat or cold and utilization of expansion energy released from existing production processes or from release of pressurized liquids for transportation.
3. Adaptation of equipment, facilities, and industrial processes: Equipment and industrial processes and electrification of industrial production processes to replace fossil fuel processes.
4. Flexibility: Temporary storage of electrical and thermal energy.
5. Renewable energy: Production of renewable energy.

A general exclusion applies for small investments (i.e., less than EUR 1.000) or in case the internal rate of return of the investment is higher than 13%. Additional conditions can apply depending on the type of investment. 

Investments in carbon emission free transportation (included in the ‘Transportation Investment List’)

Investments in carbon emission free transportation are classified into the following four main categories in the Royal Decree:

1. Rail Transport: Investments in carbon-emission-free locomotives, railcars, and supporting infrastructure.
2. Road Transport: Includes bicycles, e-bikes, and emission-free motor vehicles for logistics or passenger transport, as well as related infrastructure (e.g., bike storage, locker rooms).
3. Maritime and Inland Waterway Transport: Covers emission-free vessels and equipment for green shipping.
4. Charging Infrastructure: Investments in public and private infrastructure for charging electric or hydrogen-powered vehicles as mentioned in some of the categories above.

Note that within this ‘Transportation Investment List’, the amount of the investment eligible for the investment deduction is in some cases capped per investment. 

Environment-friendly investments (included in the ‘Environment Investment List’)

The list on environment-friendly investments outlines investments in fixed assets with a positive environmental impact categorized into these three groups:

1. Resource Management: Investments that reduce resource usage and waste, such as water-saving devices and equipment for recycling or re-use.
2. Climate: Investments aimed at reducing greenhouse gas emissions, including investments for the ‘greening’ of non-public areas of a facility.
3. Environmental Protection: Investments enabling the replacement of harmful chemicals with safer alternatives.

Digital investments supporting the three previous categories

The fourth thematic deduction relates to digital fixed assets acquired to support the above-mentioned investments. Although the Royal Decrees of 20 December mention this theme, a specific investment list has yet to be established. Further regulatory updates are expected to define the eligible digital assets.

Technology deduction

Under the new law, the investment deduction for environment-friendly investments in R&D and patents will be renamed as technology deduction. The qualifying investments under this deduction remain as follows:

• Patents.
• Fixed assets used to promote research and development of new products and advanced technologies that have no impact on the environment or aim to minimize the negative impact on the environment of existing products and technologies as much as possible.

The percentages for the technology deduction are fixed at 13.5% for the one-off deduction and 20.5% for the spread deduction. There is also still the possibility to opt for a tax credit calculated at 25% of the amount of the investment deduction. Recently, the R&D tax credit regime was updated in view of the global minimum tax rules and made refundable after four years already (instead of five in the past). 

When applying the investment deduction to the activated wages of researchers within the R&D framework, it is important to check how it interacts with the wage withholding tax exemption for R&D. Note that when wages which benefit from the (partial) wage withholding tax exemption are included in the acquisition value of assets, the exempt amount may not be included in the calculation basis of the investment deduction, which eliminates the possibility of double deduction. This principle was already applied in the context of the R&D tax credit and is now extended to all categories of investment deduction in the new law. For more information on the (partial) wage withholding tax exemption and the guidelines recently published by BELSPO, we refer to our article regarding an update on the R&D wage withholding tax exemption.

Formalities

To benefit from the thematic deduction and the technology deduction, an attestation from the competent authority should be requested.

The modalities concerning these attestations are further defined in the second Royal Decree dated 20 December 2024.

Taxpayers must now submit the form and attestation with their income tax return to claim the increased thematic deduction or the technology deduction. Under the old regime, this attestation only had to be made available to the tax authorities for the R&D investment deduction.

For the thematic deduction, the attestation must be requested within three months after the end of the taxable period in which the investment was made. The competent authority will issue the attestation (or refusal) within six months of the request.

Investment certificate

The second Royal Decree also introduces a new type of attestation, the “investment certificate”. For investments made in multiple taxable periods, taxpayers will have the option to apply for an "investment certificate" based on the valid investment lists of the respective taxable period. The application for the certificate must be submitted within three months after the last day of the taxable period in which the investment project starts. For assets that are part of an investment project with an approved investment certificate, the conformity of the investment will be assessed based on the investment lists applicable at the time the certificate is requested. This provides certainty for long-term projects (those lasting more than three years), as the relevant investment lists may be updated or changed during the course of the project.