Increased ordinary one-off investment deduction

The investment deduction of 25% already knew many changes since its start. Following Corona further adjustments have been made.

If certain conditions are met, this deduction allows a part of the profit to be exempt up to a certain percentage of the acquisition or investment value of new tangible and intangible fixed assets that are used in Belgium for the exercise of a professional activity. 

For which companies?

Only SME companies can apply the ordinary one-off investment deduction. These are companies that are classified as a small company in accordance with the Company Code.  A company is small if it does not exceed more than one of the following criteria for the last closed financial year:

• Annual average of the personnel: 50 employees
• Annual turnover VAT excluded: 9.000.000 euro
• Balance sheet total: 4.500.000 euro

If more than one of the criteria are exceeded or are no longer exceeded, this only has consequences if this occurs in two consecutive financial years. The consequences will then take effect from the following financial year.
In case of affiliated companies, the criteria for turnover and balance sheet must be calculated on a consolidated basis.

The company must then be small in the year of the investment, this is in the financial year in which the investments become depreciable.

Percentage

The base percentage is 8%. 

For investments done between January 1st 2018 and December 31st 2019, this percentage was temporarily increased to 20%. From January  1st 2020, the base rate of 8% would then apply again. However, following the Covid pandemic, it was again temporarily increased, this time to 25% and this for investments made from March 12th 2020 to December 31st 2020.

The latter measure was then further extended for qualifying investments until December 31st 2022.
Attention: the investments are linked to the calendar year and not to the financial year!

Example

• New qualifying investment of 80.000 euro in 2021 
• Investment deduction = 20.000 euro (80.000 x 25 %) 
• This provides SMEs whose first 100.000 euros are taxed at the reduced rate of 20% a tax saving of 4.000 euros. 

Some points of attention

• This investment deduction cannot be combined with the notional interest deduction.
• If the deduction cannot be used because there isn’t (enough) profit, the unused portion of the investment deduction is transferable for one year. However, the unused investment deduction for investments made in 2019 is transferable for two years.
• The existing increased deductions for among others investments in patents, environmentally friendly investments in R&D, smoke extraction or ventilation systems in the catering industry and digital investments (13.5%) as well as those in the securing of professional premises and commercial vehicles (20.5%) will be out of play as these are lower than the now generally increased deduction of 25%.

Conclusion

The extension is good news for SMEs. You still have until the end of next year to make investments that qualify for the increased deduction.