Innovation Income Deduction: new rules as of 2025

On 22 March 2024, amendments were proposed to the draft act of 29 February 2024 containing various tax provisions, including substantial modifications to the innovation income deduction ("IID") regime.

Under the proposed changes, corporate taxpayers could choose to not deduct part or all of their IID from their taxable income. Instead, they could convert it into a non-refundable tax credit. This tax credit could be carried forward indefinitely and used to reduce corporate income tax in future periods. Taxpayers would decide each year whether to use this tax credit option. This change is expected to take effect starting from tax year 2025.

These changes are significant, especially considering the introduction of Pillar 2 rules in Belgium. On the one hand, companies could voluntarily increase their current tax payments, raising their effective tax rate ("ETR"). They could then carry forward any unused IID as a non-refundable credit, rather than losing it due to the application of the 15% minimum tax rate. On the other hand, if a company's ETR for a given year exceeds 15%, they could use the tax credit to lower it.

In case of questions, please do not hesitate to reach out to your regular contact within the Fieldfisher Belgium tax team.