How to use the innovation box in your vpb

The Dutch government offers the innovation box to fiscally stimulate innovative activities. It is a special facility within the Dutch corporate income tax system. It allows you to pay a reduced corporate income tax rate of 9% on profits from qualifying innovations, if you meet the conditions.

Who can use the innovation box?

Only legal entities that must pay corporate income tax can use the innovation box. In practice, these are companies that develop software, technical products, production processes, medical technology, or patented inventions.

How does the innovation box work?

You use the innovation box when filing your corporate tax return. To fill in the innovation box, you need to:

• have an R&D declaration
• meet the conditions of the innovation box
• calculate how much profit you make from an innovation and show how you made this calculation

You can use the innovation box for more than one profitable innovation. You fill it in on your corporate tax return. In it, you list the profits from innovations for which your company carried out the research and development.

The standard Dutch corporate income tax rates are:

• 19% on taxable profits up to and including €200,000
• 25.8% on the part of taxable profits above €200,000

When using the innovation box, you instead pay 9% corporate income tax on these profits.

Example

Your company develops software. You have applied for the WBSO before you started any research and development and have received an R&D declaration. You launch your innovative software and it generates a €300,000 profit. This qualifies for the innovation box because the profit is the result of an innovation. Instead of paying the regular Dutch corporate income tax rates, you pay 9% on this profit.

Step 1: Apply for WBSO and get an R&D declaration

You have an idea for an innovative product.

• Before you start the research and development stage, you apply for the R&D tax credit scheme, WBSO at the Netherlands Enterprise Agency (RVO).
• RVO issues an R&D declaration (S&O verklaring) for your project. This declaration confirms that the project qualifies for the WBSO scheme.
• To use the innovation box, you need this R&D declaration.

Check the conditions of the WBSO

You must apply for WBSO before you start the R&D. The WBSO allows businesses to pay lower wage tax and lower national insurance contributions. This tax scheme comes with its own set of rules and conditions. Read these carefully and find out if you meet the basic conditions. You can apply for WBSO at the Netherlands Enterprise Agency RVO.

Step 2: Check if you meet the conditions of the innovation box

Your R&D stage is finished. You are now selling your innovation and making a profit. When filing your corporate tax return, you use the innovation box. The following conditions apply to using the innovation box:

• Your company must be liable for corporate income tax in the Netherlands. Your business structure must have legal personality, for instance, a BV or NV.
• Your company must have produced the innovation yourself. You have carried out the R&D work at your own expense and risk.
• Have you purchased an innovative product from another company and developed it further? And does that result in a new innovative product you created? You can only file the profit over that new product in the innovation box.
• Your company received an S&O verklaring (R&D declaration) for the R&D work needed to develop your innovative product.
• Before profits can be taxed in the innovation box, you must first offset the R&D and development costs that were previously deducted from your taxable profits. This requirement is the so-called box threshold (boxdrempel). Read how to calculate the box threshold on the Tax Administration website (in Dutch).
• If your innovation produces a loss instead of a profit, you can deduct this loss from the ‘regular’ box. You do not file losses under the innovation box. You can offset losses against taxable profits from the previous year and the coming years.
• If part of the development work was outsourced to a related company, only part of the resulting profits qualify for the innovation box. This follows the international Nexus approach, which links the tax benefit to the R&D activities actually carried out by your company.
• The innovation box does not apply to brands and logos.
• There is only one innovation box. If you are making a profit with more than one innovation, you use the box for all these profits.

You can apply for the innovation box at the Netherlands Tax Administration (Belastingdienst).

Extra conditions for larger taxpayers

The conditions above apply to all tax-paying companies. But there are 2 extra conditions for larger taxpayers (grotere belastingplichtigen). Whether your company is considered a smaller or larger taxpayer depends on the size of your turnover and the benefits derived from your intellectual property.

Check if your company is a smaller or larger taxpayer on the Dutch Tax Administration website (in Dutch) and see which conditions apply to your situation.

These are the 2 extra conditions for larger taxpayers:

1. In addition to a R&D declaration for your innovation, you must also have one of the following:

   • a patent (pending);
   • plant breeders' rights (pending);
   • a legal access ticket to use and sell biological plant protection products;
   • software;
   • a licence to market new medications;
   • a registered utility model for the protection of the innovation;
   • a supplementary protection certificate provided by the Netherlands Patent Office.
2. If you have a patent, the profit of your innovation must be largely due to this patent (at least 30%).

Step 3: Make sure your administration is in order

To use the innovation box, the Tax Administration will want to see the following:

• It must be clear from your administration that you have 1 or more innovative products (immateriële activa) that fit the requirements of the innovation box.
• The total profit made from these inventions.
• How you have calculated these profits.

Do you have more than one innovation?

And are you calculating the profits, the box threshold, and the Nexus approach per group of related innovations? Then it must be clear from your administration why it is impossible to determine the profit per innovation.

Step 4: File your corporate tax return

If you have prepared all the paperwork and done all the calculations, you can fill out the corporate tax return. You file yearly, via the Mijn Belastingdienst Zakelijk online portal of the Tax Administration. You can also make use of the services of an accountant or tax adviser to file the return for you.

Read more about filing your corporate tax return