From the Netherlands: New Dutch Innovation Box Regime Approved
Sam Abbing and Josine Vos - Andersen Tax & Legal, the Netherlands, a Member firm of Andersen Global
On June 28, 2017, the Dutch Ministry of Finance announced that the new Dutch innovation box regime, as applicable as per January 1, 2017, has been approved by the ECOFIN Code of Conduct Group. Earlier, in view of BEPS action 5, the Netherlands committed itself voluntarily to already adapt the Dutch innovation box regime and to align the regime with the minimum requirements for so-called Preferential IP regimes. The subsequent step was to obtain approval from the ECOFIN Code of Conduct group, enhancing the long term sustainability of the regime.
In addition to the Ecofin approval, the OECD also recently announced, in its report to the G20 leaders, that the new Dutch innovation box regime can be considered as not harmful. The approval from the OECD stems from the investigations by the OECD Forum on Harmful Tax Prices on 125 preferential tax regimes since July 2016. Based on these investigations, the Forum has concluded that the IP regimes of 11 countries, including the Netherlands, were found to be in accordance the international consensus reached under BEPS action 5.
The recent approvals both confirm that the Dutch innovation box regime is an internationally acceptable instrument to stimulate innovative activities.
Under the Dutch innovation box regime, Dutch companies that invest in technical innovation and have been granted a R&D certificate for their innovative activities, can apply a reduced corporate income tax rate of 5% on profits that can be allocated to the innovation box, as opposed to the normal corporate income tax rate of 25%.
The main changes to the Dutch innovation box, based on the BEPS action plan 5 are:
- Stricter conditions for IP to qualify for the application of the Dutch innovation box, in order to safeguard its aim to further support technological innovations;
- Implementation of the so-called Nexus approach allowing the allocation of profits to the innovation box. This approach should ensure limitation of the benefits if R&D activities are outsourced to related parties abroad and demands that the innovative activities actually take place in the Netherlands.
Thus, in case of companies performing innovative activities in the Netherlands or in case of companies considering starting up innovative activities, both looking for long term and sustainable tax incentives in this respect, please feel free to contact us so we can check whether the beneficial innovation box regime can be applied and/or whether any other R&D incentives that the Netherlands offer Dutch innovative companies may apply.