The Netherlands: innovation incentives overview

There are three main innovation incentives programmes in The Netherlands:

• WBSO tax credit
  Tax credit scheme that can reduce the Dutch wage tax cost for R&D activities if certain requirements are met.
• Innovation box
  The innovation box scheme allows eligible tax payers to pay a reduced rate of 9% corporate income tax on net earnings attributable to R&D activities.
• Depreciation intangibles
  Costs relating to the development of intangible assets can be depreciated fully in the year in which they occur.

Are there specific industries that qualify or are there reliefs that require a particular industry focus?

The incentives apply to all industries, but due to the criteria for R&D activities, certain industries may benefit more than others.

Do you have to apply for incentives prior to conducting the research or claiming the benefit?

A taxpayer may apply the WBSO R&D tax credit at any time, but only for future activities. This means an application should always be submitted in advance.

For the wage cost reduction scheme, there is a specific application procedure. The benefit can only be applied once the company has received a WBSO statement from the Netherlands Enterprise Agency (RVO). A WBSO statement is also necessary to become eligible for Innovation Box.

Are there specific documentation or reporting requirements for claiming incentives?

• WBSO tax credit   
  The R&D hours of the employees should be recorded, as well as specific WBSO documentation requirements.   
• Innovation box 
  A detailed calculation of innovation box profit should be pre-pared each year, including relevant information about the qualifying intan-gible assets. 
• Depreciation intangibles
  For the depreciation of development costs, no application is necessary. The depreciation can be claimed in the relevant tax return.

WBSO tax credit 

The exact quantification can vary depending on specific circumstances, like the size of the company and the kind of R&D work being carried out. As a general rule, smaller companies can receive up to 40% of their R&D salaries as a WBSO benefit, while medium and larger companies (i.e > €350,000 R&D salary) can receive up to 16%. 

Innovation Box 

The part of the profit of the company attributable to R&D is taxed at a corporate income tax rate of 9% (instead of 25.8% maximum).

WBSO 

Always apply in advance. For example, you can apply for the WBSO with a start month of January 2024 until 20 December 2023. After the calendar year ends (by 31 March at the latest), the taxpayer must submit a realisation report. 

Innovation box 

The innovation box must be claimed before the corporate tax assessment for the year to which the claim relates becomes final.

• WBSO
  not only available to corporate entities  
• Innovation box
  yes only to corporate entities
• Depreciation of intangibles
  not only available to corporate entities    

Company size does not matter, but the requirements are different for smaller and larger tax payers. 

Innovation box

The innovation box scheme distinguishes between "smaller" and "larger" taxpayers. A company is classified as a "smaller" taxpayer if over a period of five years: the group turnover does not exceed €250 million; and the profit attributable to innovation box does not exceed €37.5 million.

Larger taxpayers should – besides a WBSO statement – have an additional ‘entrance ticket’ to be eligible for innovation box. 

In general, the application of innovation box will be negotiated with the tax authorities to determine the amount of profit allocated to R&D activities, and therefore applicable to innovation box. • 

Innovation box should be claimed in the corporate tax return starting in the year in which benefits are received from the intangibles.

What are the criteria that define activities that qualify as R&D, and who determines the criteria?

• WBSO tax credit
  The WBSO R&D tax credit offers support for two different types of projects: 
• Development projects 
  This covers the development of technically new physical prod-ucts, physical production processes or software (or parts there-of). 
• Technical-scientific research 
  This category covers explanatory research of a technical nature.

To benefit from the WBSO, the R&D activities should be per-formed by employees in the Netherlands. The developments can be re-viewed by the Netherlands Enterprise Agency (RVO) to check if the condi-tions as depicted in the application are met.

Innovation box

Innovation box only applies to taxpayers who have self-developed (for their own account and risk) intangible assets for which a WBSO statement has been granted. These R&D activities should have led to an intangible asset, such as a product, a process, and/or software.

In addition to the WBSO statement, lager taxpayers must pos-sess one of the following:

• a patent (or application for a patent)   
• a plant variety right (or application for a plant variety right)
• development of new biological crop protection products
• software
• a license to place medicines on the market
• a registered utility model for the protection of innovation  
• a supplementary protection certificate granted by Netherlands Pa-tent Office

Innovation box is applicable if at least 30% of the profits have been originated by the intangible(s). Self-developed trademarks or logos are excluded from the scheme.  

Innovation box applies for intangible assets which are patented in the Netherlands or abroad (EU countries or non-EU countries). It is aligned with the modified nexus approach.

Dutch tax authorities may review the application.

Depreciation
All relevant costs for the development of an intangible asset are relevant for the depreciation. The tax authorities may check the amounts and the relevance of these costs. 

Do the R&D activities have to be performed within the country to quali-fy? If not, is there a distinction made between the country where the claimant company is resident, EU countries, and non-EU countries?

Yes, qualifying R&D activities have to be performed in the Netherlands.

Does the intellectual property need to reside in the country granting the incentives or in the company claiming the incentives?

Yes, the IP must reside in the Netherlands.

Does the tax authority have to review the resultant developments to allow a deduction or credit?

 There is no such requirement.

WBSO tax credit

Wage costs of the R&D personnel and costs of materials typically qualify.

Depreciation

All costs relating to the development of the R&D, provided they are at arm’s length. Certain costs may not be tax deductible.

Are the incentives temporary or permanent?

• WBSO tax credit
  The wage tax deduction is permanent.
• Innovation box
  The benefits are permanent.
• Depreciation
  The R&D the benefit is in principle temporary, as upon a sale of the assets the difference in tax book value and the real value may be realised.

How is the benefit obtained?

• WBSO tax credit
  Reduction in wage tax payable to the Dutch tax authorities (benefit for the company).
• Innovation box
  Reduction in corporate income tax payable.
  Depreciation
  Reduction in corporate income tax payable in the year the costs are depreciated.

Are the incentives incremental in nature or volume-based?

• WBSO
  Smaller companies can receive more WBSO benefit, while medium and larger companies can receive less.
• Innovation box
  This incentive is not volume based. The part of the profit of the company attributable to the R&D-function will be taxed against a corporate income tax rate of 9% (instead of 25.8% maximum).
• Depreciation
  Not incremental nor volume based.

Are there general rules for estimating the value of the incentives?

• WBSO
  Smaller companies can receive up to 40% of their R&D salaries as a WBSO benefit, while medium and larger companies (i.e > €350,000 R&D salary) can receive up to 16%.
• Innovation box
  Only the profit attributable to the R&D activities performed by the taxpayer itself – based on a formula – remains eligible for tax benefits. In general, this part will be between 20% - 50% dependant on the amount of WBSO-hours and (other) key-functions of the company.

Since 2017, a substance requirement has been introduced, including a mathematical approach (nexus approach). When companies outsource more than a certain amount of their R&D activities to affiliated entities, the innovation box benefit is restricted.

• Determine qualifying projects
• Discuss the importance of R&D function
• Apply for a WBSO-statement from RVO
• Claim the WBSO-benefits in the relevant wage tax return(s)
• Obtain ruling from tax authorities to determine the proportion of profit that can be attributed to Innovation Box
• Prepare application information
• Submit claim with corporation tax return

Is there a cap on the maximum level of benefit that can be received per year, per company, or for all the qualifying taxpayers together?

No.

Are tax credits refundable?

Yes.

Can surplus incentives be carried back or forward and used in years other than the origination years?

N/a.

Are there any other types of limitations?

• Innovation box
  R&D costs should first be recaptured before innovation box becomes effectively applicable.

 Are the R&D costs deductible when deriving taxable income?        

• WBSO tax credit
  N/a.
• Innovation box
  Yes, R&D costs are deductible. R&D costs should first be recaptured before innovation box becomes effectively applicable.
• Depreciation
  R&D costs need not to be capitalised, they can be fully depreciated in the year they arise.