Optimizing your R&D costs through the exemption from the professional withholding tax for knowledge staff (EPWT)

R&D activities often go paired with the employment of so called “knowledge staff”, being employees who have obtained certain degrees in (computer) science, health care or product development.  

To foster innovative entrepreneurship, a tax grant is put in place to allow innovative companies to retain a part of the professional withholding tax due on wages for “knowledge staff”. The tax grant can amount to 80% of the professional withholding tax due for a particular employee and is calculated on the employee's time commitment to R&D activities.

Qualifying R&D activities for the exemption from the professional withholding tax

To qualify, a company should engage in research activities such as:

• Fundamental research: being research aimed at acquiring new knowledge without a direct practical application or use;
• Industrial research: planned research or critical investigation to acquire new knowledge and skills for developing new products, processes or services including significant improvement in existing assets, processes or services;
• ‍Experimental development: the acquisition and / or use of existing scientific, technical, business and other knowledge and skills for any plan, scheme or design for new, altered or improved products, processes or services. This includes the conceptual formulation and design of alternative products, processes or services and the recording of information thereon and the preparation of designs, drawings, plans and other documentation, provided that they are not intended for commercial use.
• Experimental software development: this includes prototyping, demonstrations, pilot development, testing and validation of new or improved products, processed or services.

The development of commercially usable prototypes and pilot projects also qualify as experimental development if the prototype is the final commercial product but its production is too expensive to be used only for demonstration and validation purposes.

Qualifying employees for the exemption from the professional withholding tax for R&D activities

Employees with master's and bachelor's degrees in science, health care, computer science and product development are eligible for the application. For master degrees the company can benefit from a tax grant up to 80% of the withholding tax due. For bachelor degrees, the tax grant can reach up to 80% with a maximum of 50% (25% for middle sized and big companies) of the total exemption of the amount retained for the master degrees.

How to report your R&D activities to BELSPO  

To apply the EPWT, research activities must be reported to BELSPO. We always recommend our clients to have BELSPO give a binding opinion on the research project. We’ll help you in defining and optimizing your R&D projects by putting in place the right processes to document and track all activities. BELSPO then verifies if all requirements such as diplomas, the research activities themselves and the determination of the research project are met. If BELSPO approves the application, this is binding for both the applicant and the tax authorities, giving you, as a company, legal certainty about the tax treatment of your withholding tax on these wage costs.

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