Belgian companies that derive income from patents or copyrighted software can exempt up to 85% of that income from corporate tax. This is the innovation deduction - one of the most favourable tax regulations for IT and consultancy companies in Belgium.
In this article, you can read what the scheme includes, who qualifies and what documentation the tax authorities expect.
📌 The conditions and percentages of the innovation deduction may change due to new legislation. Keep an eye on this blog for updates, or check the FPS Finance for the most up to date information.
The most important insights
- The innovation deduction is 85% of net innovation income. Only 15% is taxed at the normal corporate tax rate.
- Unlimited portability: Are you making a loss this year? Then you can transfer the unused innovation allowance indefinitely to subsequent years.
- Copyrighted software qualifies explicitly, provided it is technically innovative. In 2026, positive advice from Belspo is essential for your burden of proof.
- The nexus approach including uplift determines your advantage. You may increase your qualifying costs by 30% to maximize your deduction.
- Net income: Costs are deducted first. Royalties and licensing income are reduced by associated R&D costs.
- Documentation is the core. Without a substantiated innovation file and a correct nexus calculation, the tax authorities reject the deduction.
- Combining is possible: The innovation deduction and the R&D withholding tax exemption can be used side by side for maximum benefit.
What is the innovation deduction?
The innovation deduction - in French reduction for innovation revenue - allows companies to deduct 85% of their net innovation income from taxable profit.
The regulation is laid down in articles 205/1 to 205/4 of the WIB 92 and follows the OECD guidelines. Since the introduction of the nexus approach, the tax benefit must be directly linked to the company's own R&D efforts.
What income is eligible?
The deduction applies to income from the following intellectual property rights:
- Patents and additional protection certificates.
- Plant Breeders' Rights (agricultural/biotech).
- Copyrighted software: The most important category for the IT sector.
Note: The software must be the result of a creative and technical development process. In 2026, the tax authorities will look closely at the “technical uncertainty” (Frascati standard). Standard configurations are not included.
What is net innovation income?
The deduction applies to the net amount. This means the gross income from IP law less:
- Direct R&D costs associated with the IP.
- IP rights debits.
- Costs of outsourced research.
What documentation do the tax authorities expect?
The tax authorities can fully question the deduction when audited. Your file must contain at least:
- Description of the IP right: How did it come about technically?
- Belspo advice: For software development, Belspo's favourable advice about the innovative nature is the best protection against sanctions.
- Nexus calculation: A detailed cost overview per IP right, including the 30% uplift calculation.
- Time registration: Evidence of the time spent by the developers involved.
Combine with the R&D withholding tax exemption
Both measures are mutually reinforcing:
- Exemption from withholding tax: Reduces wage costs (cash flow benefit during development).
- Innovation deduction: Lowers corporate tax (advantage in commercialization).
Although they differ in their calculation basis, shared time registration in a tool such as TimeChimp is the basis for both cases.
TimeChimp helps you correctly record innovation hours
For example, TimeChimp supports you in substantiating the innovation deduction.
- Time registration per project and IP rights: link hours directly to the software product or patent for which you are claiming the deduction - exactly the structure that the tax authorities expect for the nexus substantiation.
- Distinction between internal and outsourced work: record which hours have been worked internally and which are run through external parties. This distinction is essential for a correct nexus calculation.
- Cost reports per project: export an overview of R&D expenditures by IP right, including the breakdown you need for the uplift calculation.
- Real-time registration via mobile and desktop: no retrospective estimates - the tax authorities expect demonstrable time spent, no monthly reconstructions.
- Archiving and export options: keep quarterly hourly statements and export them directly for use in your tax file or with your tax advisor.
Conclusion
With an 85% exemption, the innovation deduction is one of the most powerful tax instruments in Belgium. However, the nexus calculation and the documentation requirement (including the Belspo advice for software) require watertight administration from the start of the project.
Key deadlines:
- Annually: Perform a Nexus calculation and update the innovation file when filing the corporate tax return.
- When checked: Immediate submission of time overviews and technical files for each IP right.
👉 Do you want to register innovation hours in a way that supports the nexus calculation and a tax audit? Start a free trial.
