Dutch Innovation Box regime in the Netherlands in 2017
The Dutch Innovation Box regime aims to stimulate technical innovation in the Netherlands. Since 1-1-2017, new regulations of the Dutch Innovation Box regime have become into force. Firstly, we will outline the background of the Innovation Box regime in the Netherlands. Secondly, we will mention the new regulations of the Dutch Innovation Box regime.
Background of the Dutch Innovation Box regime
The Dutch Innovation Box regime aims to stimulate technical innovation in the Netherlands. Profits derived from intangibles that qualify for the Innovation Box regime are taxed at an effective 5% rate. Considering that the normal Dutch corporate income tax rate is 25% over taxable profits above EUR 200,000, innovative companies can realise significant tax savings in the Netherlands.
Conditions of the former Dutch Innovation Box regime
Before 2017, the following conditions had to be met:
- the taxpayer had to be the owner of an intangible asset, which he developed himself
- the self-developed intangible asset had to have been granted
- a patent
- a breeder's right or
- an R&D declaration (S&O verklaring)
- the purchasing and further development of an intangible asset can, under certain conditions, also qualify for the Innovation Box.
Brands, trademark and comparable rights are excluded from the Dutch Innovation Box regime. In practice, the amount of the innovative profit is determined in agreement with the Dutch tax authorities.
New regulations taken effect as of 1-1-2017
As a result of the outcomes of the OECD report on Base Erosion and Profit Shifting (BEPS) Action Plan 5, the Netherlands has changed the Innovation Box regime as of 1-1-2017. The new regulations distinguish between ‘small’ and ‘large’ taxpayers.
- the total (global group-wide) net turnover is less than EUR 250 million over a period of five years AND
- the qualifying intangible assets generate less than EUR 37.5 million in profits over a period of five years.
For the small taxpayers, the R&D certificate would continue to be a stand-alone ticket to the Dutch Innovation Box.
Taxpayers that exceed either of these thresholds are considered large taxpayers. Large taxpayers only have access to the Innovation Box if, besides an R&D certificate, they also have (an exclusive licence for)
- a patent or plant breeder’s right; or
- a permit from an EU Member State to trade medicines; or
- a supplementary protection certificate from the patent centre (‘Octrooicentrum Nederland) or
- a registered utility model to protect innovation; or
Regarding the patents, the Innovation Box can be applied during the application period, provided the application is ultimately successful.
Taxpayers that outsource more than 23% of their R&D activities to group companies are faced with restrictions under the new Innovation Box regime (so-called ‘substance requirements’). In addition, other changes have been made in the new regulations, such as administrative requirements.
Recent Dutch Innovation Box regime tax rulings
The Secretary of State of the Finance department has concluded in an official decision of this department, that tax rulings regarding the Dutch Innovation Box regime which were signed before 31-12-2016, could be continued for small companies. These small companies have to meet the requirements as mentioned in the first paragraph. In addition, the small companies have to sign a statement that clarifies that the company meets all of the requirements. The statement must be received by the Dutch tax authorities together with the Corporate Income Tax return 2017 at the latest. If the facts and circumstances of the company change after signing the agreement, the Dutch Tax Authorities have to be informed by the company about these different circumstances as well.
Do you have a Dutch Innovation Box regime ruling dated before 31-12-2016 and do you want to know if you need to take some action regarding this ruling? Or do you have any further questions about the Dutch Innovation Box regime? Please do not hesitate to contact our colleague Lodewijk Derkman.