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Setting up R&D activities in Flanders
Welcome to Flanders, hotspot for innovative investments
It’s no secret that Flanders offers a pocket-sized gateway to all the building blocks your company needs for fruitful R&D activities and business innovation, from agile industry partners and a supportive government to accessible academic institutions.
Join the innovation frenzy by tapping into the expertise of Flanders’ R&D ecosystem, which includes:
- strategic research centers;
- top-notch universities and research groups;
- open innovation clusters;
- agile niche players in some of the most advanced industries;
- and much, much more.
AB InBev’s refreshing take on innovation in Flanders
From Stella Artois to Hoegaarden, from Belle-Vue Kriek to Tripel Karmeliet… beers from Flanders are known and cherished the world over. It’s only fitting that AB InBev, the largest beer brewer in the world, remains firmly anchored in the region. Its Global Innovation & Technology Center (GITEC) in Leuven drives countless inventions – from new brewing methods and flavors to packaging.
A key ingredient of AB InBev’s success? “Being part of Flanders’ unique innovation ecosystem.” Kristof Geutjes, senior corporate affairs manager, and Esteban Martinez, global incentive & subvention manager, explain why.
Flanders’ innovation support and R&D tax incentives
Support for innovation in Flanders can be found in the form of R&D funding for research projects and development projects, granted by Flanders Innovation & Entrepreneurship (VLAIO). This government agency also grants access to doctoral scholarship programs (Baekeland mandates program) as well as grants for strategic transformation projects and ecological investments.
What’s more, R&D tax relief isn’t hard to find in Flanders either. By setting up a business in the region, you’ll gain access to interesting R&D tax incentives as well as various commercialization and IP incentives.
R&D tax incentives
|R&D payroll tax incentive||exemption from paying up to 80% of withholding tax on researchers’ income|
|R&D tax credit/investment deduction|
|Special tax status for inpatriate executives and researchers|
|Innovation premium||for an innovation developed by an employee that creates added value for a company’s day-to-day activities|
Tax exemption for regional grants
|Innovation income deduction||up to 85% of net innovation incomes|
Commercialization and IP incentives
|Fiscal/scientific ruling||a judicial treatment that explains to prospective investors which laws are applicable to their future projects|
Incremental notional interest deduction
|for risk capital (SMEs)|
Dividend withholding tax exemption
How JLABS (J&J Innovation) leverages R&D support in Flanders
Healthcare powerhouse Johnson & Johnson values innovation above all else. So much so, in fact, that the American multinational allocates a significant yearly budget to both internal and external innovation projects and partnerships. “Johnson & Johnson Innovation’s JLABS incubators are a major part of this strategy,” says Tom Aelbrecht, senior director for Operations, at JLABS EMEA, which is located in Beerse, Flanders.
“We decided on Flanders as our European JLABS location,” he adds, “for three main reasons: the presence of Johnson & Johnson subsidiary Janssen Pharmaceutica, the regional governmental support, subsidies and funding, and the rich local biotech and medtech ecosystem.”
5 scenarios for kickstarting your R&D success in Flanders (with case studies!)
Research and development can take on many forms in Flanders and may receive support in the form of subsidies and grants. Generally, there are 5 organization types for R&D activities that are eligible for one or more of the R&D tax incentives mentioned above.
Scenario 1: global R&D center
A global R&D center typically:
- performs a wide variety of R&D activities within a company.
- owns the IP related to the development of new processes, technologies, products, etc.
Which incentives apply?
All the tax incentives mentioned above are available to global R&D centers.
Case: Danone subsidiary Alpro commits to sustainable innovation in Flanders
By the time consumers can enjoy a new Alpro product, a lot of work has been invested behind the scenes. The Alpro subsidiary of French food company Danone opened a new global plant-based innovation center in 2018.
As a result, Alpro’s research capacity expanded by 50%, causing the food manufacturer’s commitment to innovation in Flanders to skyrocket. Alpro’s biggest production facility for plant-based food and drinks, which includes its global plant-based innovation center, is located in Wevelgem, Flanders.
Here's the full story behind Alpro’s innovative efforts in Flanders.
Scenario 2: young innovative company (YIC)
A YIC is a small start-up company that’s intensively engaged in R&D activities. The term generally encompasses all firms in an early life cycle phase. Typically:
- it has a workforce of 50 employees per year on average;
- it has a maximum turnover of EUR 7,300,000 (excluding VAT);
- its total assets do not exceed the amount of EUR 3,650,000 (except if the average employee count is higher than 100).
A YIC is eligible for R&D incentives if it:
- has been in existence for under 10 years;
- was not founded as part of a merger, restructuring, expansion or takeover;
- earmarks at least 15% of the total costs of the preceding taxable period for R&D purposes.
Which incentives apply?
All the tax incentives mentioned above are available to YICs. Since YICs often engage in R&D activities that do not break even in the first few years after investment, they particularly benefit from Flanders’ numerous incentives with impacts on their cashflow or accounting positions – rather than mere tax deductions.
Case: Brolis (Lithuania) innovates at the speed of light in Flanders
In 2017, Brolis Semiconductors decided to set up a photonics research center in Ghent, Flanders. Three Vizbaras brothers founded the Lithuanian tech start-up company in 2011. Twins Augustinas and Kristijonas are the technical brains behind the firm’s infrared technology for applications such as night goggles and devices that can detect gases in grain silos. Older brother Dominykas focuses on the business aspect of the firm. In Flanders, they found a fourth “brother” in Andreas De Groote, the researcher in charge of Brolis Ghent.
Scenario 3: contract research organization (CRO)
Especially common in pharmaceutical and biotechnology industries, a CRO is an organization that supports other companies by offering R&D services, outsourced on a contractual basis.
- provide services such as biopharmaceutical and biological assay development, preclinical and clinical research, and clinical trial management – all of which are potentially eligible to receive R&D tax incentives.
- do not own the IP related to their R&D activities.
Which incentives apply?
All the tax incentives mentioned above are available to CROs. However, the innovation income deduction will not benefit CROs, as they usually don’t apply for IP rights (this would be done by the contracting company).
There’s a small chance that CROs may apply for the innovation income deduction if they have access to certain IP rights (e.g. as co-owner or licensee) or if they have their own IP rights on developed tech used internally in the production/delivery process.
Case: Flanders’ CROs at your service!
Looking for a contract research organization (CRO) to provide support for your pharmaceutical, biotech or medtech R&D activities? Flanders offers many possibilities for outsourcing your innovative efforts.
Here are just three examples:
For a complete overview of CROs, check out the Contract Research Map!
Scenario 4: manufacturing company
By definition, a manufacturing company:
- produces goods for use or sale by means of labor and machines, tools, chemical and biological processing, or formulation;
- transforms raw materials into finished goods on a large scale;
- may carry out R&D activities outside its usual manufacturing activities for the purpose of product development, production process optimization, equipment development, etc.
Which incentives apply?
All the tax incentives mentioned above are available to manufacturing companies, including the innovation income deduction if they obtain IP rights.
Case: Daikin (Japan) makes R&D a breeze in Flanders
One of the first Japanese firms ever to invest in Flanders, air conditioning expert Daikin has been firmly anchored in the region since 1973. Through the years, the Japanese manufacturing company has expanded its activities in Flanders to include hubs in Ostend, Ghent and Brussels, an R&D department that functions as the group’s heating knowledge center, EMEA headquarters and the Daikin Europe Academy.
Scenario 5: R&D consulting company
Typically, an R&D consulting firm:
- carries out R&D activities for another corporation as a subcontractor working on a specific R&D project;
- does not become the owner of the developed technology, process, product or other types of innovations.
Which incentives apply?
All the tax incentives mentioned above are available to R&D consulting companies. However, the investment deduction/tax credit will usually not be applicable, since R&D consulting firms will most likely not have a dedicated R&D center within their own company.
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