16 Mar What is the innovation box scheme?
What is the innovation box scheme?
16 March, 2021
Companies that invest in technology may be able to use the innovation box scheme to reduce the amount of corporate income tax they pay. This is because the so-called ‘innovation box profit’ is not subject to the corporate income tax rate of (a maximum of) 25% but (a maximum of) just 9%. We outline the specifics of this scheme below.
Accessing the innovation box scheme
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. This declaration can be obtained from the Netherlands Enterprise Agency (Rijksdienst voor Ondernemend Nederland (RVO)). In the development phase, the R&D declaration entitles a company to a reduction in the payroll taxes and social security contributions to be paid.
Big companies will 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.
A lower effective rate of corporate income tax
Innovation box profit is taxed at a rate of no more than 9% (if corporation tax is 15%, this drops to just 5.4%). This is significantly lower than the standard rate of 15% or 25%.
For example: in the event of an innovation box profit of € 150,000, the tax saving achieved will be € 24,000 if the profit is taxed at a rate of 25%.
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 (ruling) for a number of years, which creates certainty about the application of the scheme (in the future).
A flat-rate scheme
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 applying for a ruling (as described above). The flat-rate innovation box may be used for a maximum of three years for any one innovation.
How to become eligible?
If you would like to utilise the innovation box scheme, it will be important for you to ascertain whether your activities qualify. 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.
Don’t hesitate to contact us if you would like any more information about the innovation box scheme.