The Dutch government is keen to promote technical innovation in the business world. On the one hand, this is done through subsidies, for example on the costs of investments. On the other, you can claim a much lower tax rate on any profits derived from innovation. However, you must meet a number of conditions to do so. Our specialists are here to help you establish the extent to which you are entitled to the advantages of the so-called innovation box.
R&D declaration: subsidy on the costs of innovation
Do you have employees who carry out research and development activities (R&D)? Then your company can apply for an R&D declaration via the Netherlands Enterprise Agency’s website, RVO.nl. However, you need to do this prior to commencement of the innovation project. Designing or developing software will usually also result in an R&D declaration.
Have you been granted an R&D declaration? Then your business will receive a subsidy of 16% to 40% of your R&D costs. The following costs are covered:
- Wage costs of employees who solve technical problems by innovative means. As an employer, you can set the subsidy off against wage tax and national insurance premiums. This results in a considerable tax deduction.
- Investments that are used in the project.
- Other types of costs attributable to the R&D project.
Innovation box
Do you have an R&D declaration and does your company produce intangible assets through the R&D activities? Then you meet the first condition for the innovation box. Under the terms of the innovation box, because of the intangible assets you have developed, your profits will be taxed at a significantly lower rate. The effective rate in that case is only 9%, while the normal rate can rise to 25%.
Further innovation box conditions
Do your sales and/or R&D profits surpass certain statutory limits? Then you are not covered by an R&D declaration alone. In such cases, in order to make use of the innovation box, you need legal rights in relation to your know-how. The most well-known are patent and plant breeders’ rights. These need to be applied for or be fully obtained. Alternatively, you could have an exclusive licence to such rights. Have you developed software? This is also sufficient, and you do not have to meet the above requirement.
Innovative knowledge in the balance sheet
Innovative knowledge, also known as intangible assets, must be developed by your company and at your own expense. However, you are not required to activate this knowledge in the balance sheet. You may deduct the costs of development from the standard rate. The lower rate of 9% only takes effect once the costs of production of the intangible assets have been covered.
Do you actually have to request in advance the innovation box, i.e. the effective 9% rate, from the Tax and Customs Administration? No, this is not a requirement, although companies often do coordinate this in advance with the Tax and Customs Administration. You can decide to do so when filing your corporate income tax return.
Which part of the profits is covered by the low rate?
On using the innovation box for the first time, the following question arises: which part of the total profits actually benefits from the low effective tax rate? There is no simple answer to this. It depends on the role played by technically innovative knowledge in the generation of your profits. The following functions, among others, can have an impact on profits:
- Production
- Sales
- General management
Do you outsource some of the development work to group companies? In that case, your advantage may be less than when you don’t outsource any work. Our professionals are here to help you determine which part of the profits qualifies for the low rate.
Need help with the innovation box?
Do you want to know if your company is eligible for the innovation box? Or do you want to determine exactly which part of your profit qualifies? Meijburg & Co’s experts are here to answer all of your questions concerning the innovation box. We have experience across a broad range of sectors. Moreover, we ensure conformity with the Dutch Tax and Customs Administration. So that you have nothing to worry about.
