Dutch tax incentives for innovation
The Dutch government offers two attractive tax incentives for innovative businesses. One is in effect an R&D employment cost subsidy and the other offers a tax rate of just 5% for profits from successful innovation.
Employment cost subsidies – R&D Certificate
Does your Dutch business have employees working in the R&D area? If so, a subsidy of between 18-64% of the related employment costs may be available. If the incentive is granted, the company effectively gets a credit which it can set against its obligation to pay the related payroll tax and social security contributions. The benefit is available in respect of employees who are engaged in qualifying R&D, such as applied research, innovative technical developments for products, processes, or software programs.
In order to obtain the benefit of this incentive the company should apply for an R&D Certificate (S&O-verklaring) to the “Agentschap NL”, a Dutch government agency.
Obtaining such an R&D Certificate can also be relevant in obtaining the benefits of the “Innovation Box” tax incentive, described below.
Innovation Box – corporate income tax only 5%
A Dutch business that generates patentable technology or technology derived from activities that qualify for an R&D Certificate, may be able to benefit from the Innovation Box. This means that profits derived from exploiting that technology would be taxed at a preferential effective rate of only 5% instead of the standard rate of 25.5%. In order to qualify for the lower rate, the company must have received an R&D Certificate in connection with work that contributed towards the creation of the technology, or the company must show that it has been granted a patent (Dutch or foreign) with respect to a portion of the technology. While the incentive technically applies to technology-based “intangible assets” it is not required that an asset appears on the taxpayer’s balance sheet. In order to take advantage of the benefit the taxpayer simply elects to apply the benefit in its tax return; no prior application is required.
What proportion of the taxpayer’s total profit can benefit from the lower rate? That depends on the relative economic role the technology plays in generating profit, as opposed to factors such as sales, manufacturing and overall management. KPMG Meijburg & Co has addressed this profit allocation question on behalf of a large cross-industry selection of companies and has negotiated many advance tax rulings with the Dutch Revenue. We also have an ICT tool enabling us to quickly estimate a company’s potential Innovation Box benefits.
KPMG Meijburg & Co closely follows all developments in the Innovation Box area. Eduard Sporken will be happy to answer any questions that you may have.