5 ‘best practices’ to optimize the taxation of your industrial machinery and equipment

“Industrial taxes” include all levies on production machines of enterprises pursuing an industrial, logistics or commercial activity (wholesale). The two main taxes, also the highest and most prevalent, are the property tax on machinery and equipment and the municipal tax on driving force. There are countless other municipal taxes too: the tax on wastewater, fuel pumps, activation costs, unoccupied buildings, free distribution of unaddressed printed matter, etc.

Belgium has long been characterized by a high tax pressure not only on wages, but also on industrial equipment. This is an open secret. The tax burden in Belgium is one of the highest in Europe. A federal definition of cadastral revenue, the complete or partial exemption from property tax depending on the three regions, and the exemption from certain taxes in certain municipalities, result in an exceptionally tangled tax system in Belgium.

“The applicable tax system differs according to the location of your industrial investments”

But what is the basis for these so-called industrial taxes? Can they be optimized and, if so, how? Some explanations:

What are “industrial taxes”?

How can industrial taxation be optimized?

The property tax on machinery and equipment is based on the cadastral revenue. A first set of measures concerns the inventory of your tools, machinery and equipment.

Many enterprises do not update their inventory of tools, machinery and equipment on the pretext that they are exempted. However, that is the guarantee to optimize the tax assessment basis past, present and future.

How is this possible?

Allowing for new investments.

With the cadastral revenues established in Flanders in 1998 (the so-called “threshold value”), the Marshall Plan in Wallonia and the abolition of the property tax on machinery and equipment in the Brussels Capital Region since 1 January 2017, new investments are largely exempted from tax. In Flanders and Wallonia, in addition to these exemptions, there are also a number of new investments in machinery and equipment that might further reduce the existing cadastral revenue and, consequently, the property tax itself.

Taking account of the nature and intended use of industrial machinery and equipment.

The nature of the taxable property has an influence on the industrial taxes: machinery and equipment, given their nature, such as concrete tubs will naturally fall within the property tax, but the same applies for certain movable goods rendered immovable for their intended use. It is not always easy to decide what is immovable by reference to its nature or intended use: what, for example, is a fork-lift truck? This depends on the situation of the site, the building and the real property rights. This requires case-by-case analysis.

Annual inventory update

In order to obtain an updated and correct tax assessment basis a balance must be struck between the new investments, the old investments and completed divestments.

Some machines are no longer physically present on your site (sold, decommissioned, …) or are completely written off, and yet you continue to pay for them.

A thorough inspection and update of your inventory will enable you to reduce your cadastral revenue significantly and over the long term. This will have a positive effect on the taxation of your machinery and equipment.

To anticipate any future taxes: a non-updated inventory is a risky business. After all, it seems only reasonable to assume that your machinery and equipment will be taxed differently in future. The enterprise can anticipate on this and update its inventory.

Certain equipment seems not immediately exempted, yet it might be under a number of conditions?

… if it is beneficial for the environment, for instance. Given that the interpretation is not always clear for the tax authorities a complete file is required in order to support the requested exemptions. Here again, application differs in our three regions.

Valorising the influence of the short-term cycle on machinery and equipment.

There are deductions based on events that influence the activity of the enterprise: for example, unproductivity. Both for the property tax and for the tax on driving/lifting force you can apply for a proportional reduction of your taxes if you are able to demonstrate a certain unproductivity (slack demand, temporary outage of production line, …). You will need to act promptly, approaching the competent authorities and submitting all relevant supporting arguments.

In a general way, we can conclude that our regions do not handle a single one of these 5 points in the same way, even where it concerns optimization of the cadastral revenue which, as mentioned earlier, is federal. There is, of course, the law, but the interpretation given to it by the local authorities differs. That, however, is another debate.