Consultation to adjust innovation box regime Netherlands previous message

Consultation to adjust innovation box regime Netherlands

The Dutch innovation box regime provides for a lowered corporate income tax rate of 5% for qualifying innovative activities. As a result of various international tax developments (inter alia the OECD Base Erosion and Profit Shifting discussion), the EU member states have committed themselves to review and adjust their innovation regimes.

The Dutch government has issued on May 19th draft legislation for public consultation. Although it is just a consultation, it gives a more detailed view how the ‘new’ Dutch innovation box regime will look like. In general, the required changes result in more stringent conditions. For large (multinational) companies, it is more often required to have patented intellectual property (IP) in order to benefit. Furthermore, outsourcing a part of the creation of the intellectual property outside the Netherlands is being restricted (so-called nexus approach).

In more detail we have summarised the most important elements below:

  • Small companies are qualified as ‘groups’ that have on average an annual turnover of € 50 million and IP related benefits of € 7,5 million per year over the last 5 years. A small company is not required to have patents, but can continue to use a WBSO declaration as entry ticket for the innovation box.
  • Large companies or groups now need to have a patent (or breeder rights) next to a WBSO declaration showing that the IP is developed in the Netherlands. For software development no patent is required.
  • Not all the income that can be attributed to the innovative activities can benefit from the 5% corporate tax rate. The percentage of ‘innovative income’ that can benefit can be determined by the following formula:

    Total_Expenditure_development_IP.jpg
     
  • The new regime should be introduced in 2017, but providing for a grand fathering rule until July 1, 2021 for IP that already existed before July this year.

If you have questions or comments, please contact Guido van Asperen (guido.van.asperen@fisconti.nl or +31 615041623)

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