To date, the Netherlands has introduced the following measures to stimulate research & development (“R&D”) activities: the remittance reduction applicable to payroll tax and the R&D deduction for businesses paying personal income tax (both also referred to as WBSO; Wet Bevordering Speur- en Ontwikkelingswerk); the immediate deduction for development costs relating to intangible assets; and the innovation box. An additional form of tax relief will take effect as of January 1, 2012: the research & development deduction (“RDA”).
The RDA applies to costs and investments directly attributable to research and development. Wage costs do not qualify for the RDA, nor, in principle, do costs relating to research and development that has been contracted out to third parties. Only those costs incurred for, and investments made in, research and development undertaken after December 31, 2011, qualify for the RDA. The RDA is an additional deduction calculated over costs and investments that are, in principle, already deductible or depreciable.
A number of formalities have to be completed in order to qualify for the RDA, including submitting a written request to Agentschap NL. Deadlines apply to these formalities, but these have not yet been made public. Agentschap NL will determine what amount of relevant costs and investments will qualify for the RDA, i.e. the RDA base. A specified percentage will be applied to this amount − for 2012 this could be 40% − and the final amounts will be stipulated in a decision. The amount stated in the RDA decision will be deductible from the taxable profit as of the date stamp of the decision. An amended RDA decision, for example as a result of asset disposals within a certain period, will also affect the taxable profit as of the date of the decision. An RDA decision, or an amended RDA decision is open to objection. If the notice of objection is denied, an appeal can be filed with the Trade and Industry Appeals Tribunal (College van Beroep voor het bedrijfsleven; “CBb”).
Assuming a 25% marginal corporate income tax rate and the 40% RDA deduction, the net benefit for 2012 will be 10%. Businesses that pay personal income tax can also benefit from this measure. The government did not request approval from Brussels for the RDA, because it is a general measure.
The RDA will be financed by converting specific subsidies for, in particular, innovation. The budget for 2012 is EUR 250 million; for 2012 EUR 375 million; and from 2014 onward EUR 500 million. The RDA percentage for 2014 onward will be based on the available budget and by how much use has been made of the tax relief. The calculation method for the RDA can be adjusted annually as of January 1, to ensure it remains in line with the facts and circumstances.
Penalties can be imposed if the rules regarding the correct determination of an RDA decision are violated, for example, by failing to satisy the obligation to keep records or the notification obligation, and providing incorrect or incomplete information.
For practical reasons, i.e. to minimize the administrative burden, the structure, procedures, and rules of existing R&D tax relief measures will be followed as much as possible. The finer details of the measure will be set out in subordinate legislation.
A review will take place in the spring of 2012 to see how the benefits of the RDA have been distributed between small and medium-sized enterprises (“SME”) and large businesses. This review will take place in conjunction with the results of the WBSO evaluation for 2006-2010. The RDA will also be evaluated within five years.