Tax schemes and financial incentives for innovation

Tax schemes and financial incentives for innovation

15 March, 2022

The government is offering innovative and sustainable businesses – in virtually all sectors – a wide range of fiscal and financial incentives. One example is the research and development tax credit scheme (WBSO) that offers financial support to companies engaged in R&D activities. The WBSO can serve as an admission ticket to the Innovation Box, as well as to project financing by banks or the government. The government is attempting to make environmentally friendly and energy-saving investments attractive through tax schemes, such as the MIA (environmental investment deduction) and EIA (energy investment allowance)  encourage the purchase of environmentally friendly investments or equipment. VAMIL, a tax scheme for the arbitrary depreciation of environmental investments, promotes the market introduction of sustainable production innovations.

MIA/VAMIL

What are these incentive schemes exactly?

The MIA and VAMIL are two separate incentive schemes for investments in business assets that are on the Environment List. The MIA allows businesses to deduct up to 45% of the investment amount from the taxable profit. It then depends on the environmental effects and the prevalence of the business asset how high the percentage is. With the VAMIL, a maximum of 75% of the investment can be depreciated at a given moment. By writing off the investment earlier, businesses can reduce the taxable profit in a specific year and create an interest and liquidity advantage.

Who is eligible?

The scheme is intended for entrepreneurs who pay income tax or corporation tax in the Netherlands and who invest in environmentally friendly equipment and technology.

Making use of MIA/VAMIL

To qualify for MIA or VAMIL, the business asset must be reported to the Netherlands Enterprise Agency (RVO) within three months after the date of investment (more specifically the moment when the payment obligation is entered into). In addition, a minimum investment amount of € 2,500 per asset applies. We would be happy to assist you with the submission procedures of an MIA/VAMIL declaration.

EIA

What kind of incentive scheme is it?

The EIA is an incentive scheme that applies to investments in business assets that are on the Energy List. In 2022, the EIA is 45.5% of the investment.

Who is eligible?

The scheme is intended for entrepreneurs who pay income tax or corporation tax in the Netherlands and who invest in energy-saving business assets or in sustainable energy.

Making use of EIA

To qualify for the energy investment allowance, the business asset must be reported to the Netherlands Enterprise Agency (RVO) within three months after the date of investment (more specifically the moment when the payment obligation is entered into). In addition, a minimum investment amount of € 2,500 per asset applies. We would be happy to assist you with the submission procedures of an EIA declaration.

Innovation Box

What kind of incentive scheme is it?

The innovation box reduces the corporate tax that businesses pay on profits they make through technical innovations.

To qualify for the innovation box scheme, the innovation in question must be the result of research and development activities for which your company has been issued an R&D declaration. R&D declarations can be obtained from the Netherlands Enterprise Agency (RVO). In the development phase, the R&D declaration entitles a company to a reduction in payroll taxes and social security contributions to be paid.

Large companies also qualify for access to the innovation box scheme if they have a patent, a plant breeder’s right, software or a medicinal product for which a marketing authorisation has been granted. A big company is defined as an organisation with net group sales of more than € 50 million per year, over an average of five years, or a gross income of more than € 7.5 million per year from innovations.

The innovation box profit in 2022 is taxed at a maximum effective rate of 9% (this even drops to 5.2% if corporation tax is 15%). This is significantly lower than the standard rate of 15% or 25.8%.

For example: in the event of an innovation box profit of € 150,000, the tax savings will be € 25,200 if the profit is taxed at a rate of 25.8%.

Who is eligible?

The innovation box scheme is interesting for all companies that pay corporate tax in the Netherlands and invest in innovation.

We regularly hold consultations with the Dutch Tax and Customs Administration (Belastingdienst) about how the innovation box profit is to be determined. These consultations lead to an agreement for a number of years, which creates certainty about application of the scheme (in the future).

A flat-rate scheme has been introduced to enable SMEs to profit from the innovation box scheme. This scheme makes it possible to declare a maximum of 25% of the profit achieved (subject to a maximum of € 25,000) as a flat-rate advantage in the innovation box. This eliminates the need to determine the way in which the innovation box profit is to be calculated in consultation with the Dutch Tax and Customs Administration. The flat-rate scheme is beneficial for companies in which the benefits do not weigh up against the administrative burden involved when determining the chargeable benefits  applicable. The flat-rate innovation box may be used for a maximum of three years for any one innovation.

Making use of the Innovation Box

If you would like to utilise the innovation box, it is important to determine to ascertain whether your activities qualify for applying this scheme. Naturally, we can help you do this. If you are eligible, we can then carry out an assessment to ensure that you are able to maximise the benefit achieved. If you do not qualify for the innovation box scheme, we can sit down with you to see whether you might become eligible in the future.

WBSO

What kind of incentive scheme is it?

The WBSO (research and development tax credit) is an incentive scheme that enables you to reduce the costs of your R&D investments. To make use of the WBSO, you need to apply for an R&D declaration. An R&D declaration entitles you to a reduction in the relevant payroll taxes to be paid. In other words, the WBSO is a financial support mechanism for companies that are engaged in research and development.

The WBSO can be an admission ticket for making use of the innovation box, but also for example for obtaining project financing from banks or the government.

Who is eligible?

  • income tax businesses that meet the hour criterion and spend at least 500 hours per calendar year on research and development work;
  • income tax businesses that employ people who perform R&D activities;
  • companies subject to corporate tax and with employees who perform R&D work.

 

Making use of WBSO

A subsidy specialist can assist you with submitting an R&D application. Our office works with a number of subsidy specialists in the region who we would be happy to bring you into contact with.

More information

We would just like to reiterate that the amounts and percentages in this article apply to 2022.

Do you have any questions about any of the above incentive schemes? Or do you need help applying for one of the schemes? Our tax consultants are always happy to help.



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