Monthly Archives: February 2017

Belgium updates innovation box

Belgium has updated it’s innovation box to comply with the BEPS Action 5 recommendations; the changes are retrospective to July 2016, although claimants who were under the old rules continue to be grandfathered into those rules until the end of June 2021 (pretty much as every other country making changes has done).

Qualifying income for the innovation income deduction (as it’s technically called) include:

  • embedded income – from the sale of products or services covered by qualifying IP, or made by IP-protected processes;
  • licensing income;
  • infringement income; and
  • the gain on sale of relevant IP

Qualifying IP rights:

  • Patents;
  • Supplementary Protection Certificates (SPCs);
  • Plant variety rights (from 1 July 2016);
  • Orphan drugs (from 1 July 2016, limited to ten years);
  • Data or market exclusivity granted by a public body (from 1 July 2016); and
  • Software copyright (from 1 July 2016).


The profits from qualifying income relating to qualifying IP rights are then subject to a nexus fraction, as recommended in Action 5, and the amount resulting from the calculation will be eligible for an 85% deduction on net innovation income (the old regime allowed an 80% deduction).

Ukraine – 2017 royalty restrictions

The Ukraine has introduced a restriction on deduction of royalties – a payment of royalties to a non-resident entity, even if it is an unconnected party at arm’s length, will be non-deductible if:

  • the recipient is not the beneficial owner of the royalties;
  • the IP rights to which the royalty relates have a Ukrainian origin; or
  • the royalties are not subject to tax in the recipient’s country of residence.

Before the changes, the payer could deduct the royalty payment if they could show the payment was at arm’s length.