Dutch Innovation Box 

The Dutch innovation box is a special regime to encourage investments in technical research and development (“R&D”) and was introduced in January 2007. This was largely designed to stimulate R&D activity by Dutch businesses. Under the Dutch innovation box regime, the income attributable to qualifying assets in excess of development costs is taxable at an effective rate of 5%.

The Dutch innovation box regime can be applied if:

• The company has research and development activities in the Netherlands;
• the innovation has been developed by the company itself;
• profit is attributable to activities in the Netherlands;
• the company has obtained an R&D Declaration from the Netherlands Enterprise Agency (RVO.NL), where necessary in combination with a patent or similar right.

Recent Developments

On June 19th, 2017 the European Code of Conduct Group accepted recent Dutch legislative proposals. Under these proposals, as from 2017 the regime will be founded on qualifying intangible assets and qualifying income. In this respect, a broad range of partially new intangible assets qualify, while certain limitations are introduced. Distinction now is made between small and medium-sized taxpayers (SMEs) and (b) other taxpayers.

SMEs: 

• These are defined as companies that in a certain and four preceding financial years combined:
  • earn less than € 37.5 million from intangible assets; and
  • have a net turnover of less than € 250 million (the latter is applied to a group of companies if applicable).
• Under the new Dutch innovation box regime for SME’s only self-developed intangible assets from research & development activities and for which R&D declarations have been obtained from the Netherlands Enterprise Agency qualify.

Large companies

• These are defined as companies of which annual worldwide net group sales are more than € 50 million and of which gross earnings from intangibles exceed € 7.5 million.
• These companies should have an R&D statement issued by the Netherlands Enterprise Agency;
• The intangible assets should also qualify as one of the following:
  • Patents, plant breeder’s rights or any applications;
  • Software program(s);
  • Other unusual assets that are new and useful, including those for which:
    • the EU authorized marketing for medicinal products; or
    • the Netherlands Enterprise Agency has issued a protection certificate.
  • A registered utility model for the protection of innovation was granted;
  • Exclusive licenses for the protection of a biological plant or plant variety rights.
  • An asset that is related to intangible assets qualifying under the above for which:
    • an exclusive license to use has been granted; or
    • an R&D Declaration has been granted by the Netherlands Investment Agency.

Qualifying income

• Qualifying income is assessed per intangible or per group of qualifying intangibles. If the latter is not possible the nature of the business and the R&D activities are to be considered. The currently used methods (including the profit split method) to assess qualifying income remain applicable.
• Any qualifying income can be limited insofar R&D-activities are outsourced to a group company.

Grandfathering
Above amendments are expected to apply to financial years commencing on or after 1 January 2017. The following grandfathering rules apply:

1. The current Dutch innovation box regime in principle continues to apply to qualifying intangible assets that have been developed before 30 June 2016. This grandfathering is applicable up to and including the last financial year ending before 1 July 2021.
2. For assets developed between 30 June 2016 but before 1 January 2017 and for which only a patent or plant breeder’s right is obtained (no R&D wage tax certificates) the revised Dutch innovation box regime will be applicable.

Current appliers of the Dutch innovation box to intangible assets developed after 30 June 2016 should assess whether they can continue to apply the Dutch innovation box.

Should you need more information on the Dutch innovation box or would like us to assess whether you might be eligible, please contact us.