Netherlands jurisdiction report: Innovation tax incentives on offer

For a multinational corporation entering the European market, the Netherlands is an attractive IP jurisdiction as its legal system is efficient in both time and costs. IP cases in the Netherlands are handled by courts that have extensive experience in this respect; The Hague Court, which has specialist IP judges, has exclusive jurisdiction in patent cases and an excellent reputation.

Enforcing IP rights in the Netherlands is, therefore, both effective and efficient in the protection against infringement within Europe.

Located in the heart of Europe, the Netherlands is sometimes called the “gateway to Europe”. It is ranked as a global innovation leader with outstanding research facilities, a highly skilled technical workforce, and proficient language skills. As discussed in this article, the Netherlands actively promotes research and development (R&D) activities through a favourable corporate tax system and specific R&D tax incentives that support innovation throughout the entire R&D lifecycle.

In this article we want to focus on some of the abovementioned tax incentives that may significantly lower R&D costs and the taxable base of companies.

R&D tax credit

"Regardless of your company size or the sector you work in, you can make use of this grant scheme."

The most widely used innovation grant in the Netherlands is the R&D tax credit, known as the WBSO. Regardless of your company size or the sector you work in, you can make use of this grant scheme. The grant covers part of wage costs and may be applied for by:

• Entrepreneurs whose employees conduct R&D; and/or
• Self-employed persons who conduct R&D.
• The following activities qualify for the WBSO:
• Technical scientific research; and/or
• The development of physical products, physical production processes, or software, or parts thereof, that are technically novel for those who conduct R&D.

Companies performing particular R&D activities may benefit from a 32% tax credit (up to 40% for startups) of the first €350,000 ($409,400) in R&D wage costs and other R&D expenses and investments, and 14% for those costs and investments exceeding €350,000.

The WBSO can be applied for throughout the course of a year. The period that you can apply for extends from a minimum of three months to a maximum of 12 months. You are not allowed to submit more than three applications per year.

Innovation Box

The Innovation Box is another regime that has been set up by the Dutch government in order to stimulate innovation.

The Innovation Box is an incentive incorporated in the Corporate Income Tax Act. All companies that are subject to corporate income tax are entitled to this incentive. Companies may benefit from an effective tax rate of just 7% (instead of the standard 25%) for income that can be attributed to innovation.

R&D activities that lead to an intangible asset qualify for the Innovation Box regime. It is not required to have this asset activated on your company’s balance sheet. The company also has the right to ‘entry tickets’ to gain access to the Innovation
Box.

Entry tickets

For small businesses, the WBSO is the only entry ticket to obtain access to the Innovation Box. Larger companies will also need one of the following additional entry tickets:

• A patent;
• A plant breeder’s right;
• Original computer programming code (software);
• A licence to market a medication;
• A registered utility model to protect innovation; or
• An supplementary protection certificate (SPC).

In order to apply for the WBSO and the Innovation Box regime it is advisable to contact a subsidy consultant who has the required fiscal knowledge. 

This article was written in consultation with PNO Consultants. Michiel Rijsdijk is a partner at Arnold & Siedsma. He can be contacted at: mrijsdijk@arnold-siedsma.com