Dutch tax facilities for innovative companies
VARIOUS REGULATIONS TO FACILITATE INITIATIVES IN A TAX-FRIENDLY WAY
One of the tax-friendly schemes is facilitated through WBSO, a Dutch law promoting research and development. This law provides tax incentives for companies, knowledge centres and self-employed persons involved in R&D. The WBSO R&D tax credit scheme run by the Ministry of Economic Affairs and Climate Policy is intended to provide entrepreneurs with an incentive to invest in research. Under this law, companies can lower the wage costs for R&D, and other R&D costs and expenditures, such as for prototypes or research equipment. You can apply the R&D deduction on the tax return you submit to the Dutch Tax and Customs Administration. Companies pay less wage tax and lower their national insurance contributions.
PURPOSE OF WBSO
For the purpose of this law, research and development is defined as:
- development of technically new physical products, physical production processes, software or components thereof; and
- technical-scientific research seeking to explain phenomena in fields such as physics, chemistry, biotechnology, production technology and information and communication technology.
Applications must be received one day before the month of the desired start of the period for which this facility is required. For example, an application must be received by the Dutch Tax Authorities on the 30th of April if you want the facility to start on the 1st of May. An exception is the 1st January which requires the application to be received before the 21st of December. The application of self-employed entrepreneurs covers the period from the date of submission to the end of the calendar year.
Another interesting tax-friendly scheme is the ‘Innovation Box’, the purpose of which is to stimulate technical innovation in the Netherlands. Profits derived from intangibles that qualify for the Innovation Box scheme are taxed at a tax rate of 9%. Considering that the normal Dutch corporate income tax rate is 25% on taxable profits above € 245,000, innovative companies can make significant tax savings in the Netherlands.
Technical innovations developed under an approved R&D project that qualifies for a WBSO certificate (‘R&D declaration’) from the Ministry of Economic Affairs have access to the Innovation Box scheme. Small taxpayers with a net group turnover of EUR 250 million over 5 years or gross profits from innovative assets of more than EUR 37.5 million over 5 years only qualify for the Innovation Box regime if they have a qualifying ‘entry ticket’, i.e. a patent, utility model, breeder’s right/rights, orphan drug and supplementary protection certificate, software or other asset that is not common and/or a novelty item. For larger taxpayers, additional entry conditions apply.
If you are interested in learning more or would like to discuss the options please feel free to contact us.