In this series of blog posts, the tax lawyers of Mythra provide you with an overview of the existing Belgian tax incentives that you, as a game developer, could benefit from.
In the previous blog, we focused on the compensation for the transfer of copyright.
Today, we focus on the wage withholding tax exemption for Research and Development (‘R&D’), which also aims at lowering your salary cost as an employer.
Wage withholding tax exemption for Research and Development
As an employer (either an individual or a company) you are obliged to withhold wage withholding tax from your employees’ wages. These amounts serve as an advance payment for the personal income tax burden of your employees. As an employer, you need to transfer the amounts withheld to the Belgian tax authorities.
Employers that employ personnel that are active in the field of R&D can benefit from a partial (80%) exemption from transfer of wage withholding tax on the wages they pay. Game development may qualify as R&D (notably as ‘experimental development’). This means that 80% of the wage withholding tax does not need to be transferred to the Belgian tax authorities, but can be retained by you as an employer.
Until recently, to qualify for the partial wage withholding tax exemption, the wages had to be paid to researchers that hold a PhD or a Master’s degree in a specific area of study. As of January 1 2018, the partial wage withholding tax exemption is also available to Bachelor’s degrees, including professional bachelor’s in the field of (game) software. The regime for Bachelor’s degrees will enter into force through a ‘phased’ approach. This means that during the first two years (for wages paid as from January 1 2018 to December 31 2019) the exemption is only granted for 40%. It is intended that as of 2020 this will be increased to 80%.
In order to benefit from this regime, certain formalities need to be fulfilled. These include the preparation of a supporting file to notify the government agency BELSPO or to receive a binding advice from BELSPO.
In a nutshell
• For whom? Individuals or companies that employ PhD’s, Masters or Bachelors.
• What? Saving at a wage withholding tax level, as a result of which up to 80% of the wage withholding tax collected by the employer does not need to be transferred to the Belgian tax authorities but can be retained by the employer.
• How? Certain formalities need to be fulfilled, such as the preparation of a supporting file or a request for binding advice from the government agency BELSPO.
Want to know more?
Although the abovementioned principles appear to be rather easy, implementing this tax incentive requires the intervention of specialized tax practitioners, with sufficient experience in the game industry. Should you wish to obtain more information on how the compensation for the transfer of copyright could apply to your business, feel free to contact Mythra Tax Lawyers.
In the next blog in this series, you will learn about other tax incentives already available to the Belgian game industry, such as the Innovation Income Deduction (IID). Stay tuned!