The Dutch government has introduced the innovation box to fiscally stimulate innovative activities. It is a special tariff box on your corporate income tax return, that allows you to pay less corporate income tax
How does it work?
The innovation box is part of your corporate tax return. In it, you list the profits you make from one or more innovations that your company did the R&D for. You pay 9% corporate income tax over the profits listed in the innovation box, instead of the normal 25% . You can use the innovation box for more than one innovation. To fill in the innovation box, you need to calculate how much profit you make from an innovation. Also, there are conditions that apply and administrative obligations.
Step one: apply for WBSO and get an R&D declaration
Before you start making a profit from your invention and can use the innovation box, you will be spending a lot of time researching and developing (R&D). The outcome, your innovation, can be a new physical product, a production process, software or a new technology. To be eligible for the innovation box tax rate, you need to prove that your company was behind this R&D work necessary to come up with the innovation(s) you list. For this purpose you need an R&D declaration. Only companies that have applied for the R&D tax scheme WBSO (Wet Bevordering Speur- en Ontwikkelingswerk) can get this declaration.
You will need to apply for WBSO before you start the R&D. The WBSO allows businesses to pay lower wage tax and lower national insurance contributions. The WBSO 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.
Tax deduction for R&D made easier
Does your company carry out research and development services (Speur- en Ontwikkelingswerk, S&O)? In 2022, it has become easier to file your application for tax deduction. Read more.
Step two: check if you meet the conditions of the innovation box
Your time in R&D is over. You are now selling your innovation and making a profit. By using the innovation box while filing your corporate tax return, you can save yourself a lot of money. 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 research and development (R & D) work at your own expense and risk.
- If you have purchased an innovative product from another company and have further developed it, so that a new innovative product was created, you can only file the profit over that new product in the innovation box.
- Your company has received an S&O verklaring (R&D declaration) for the work needed to develop your innovative product.
- The profit of the innovation must be higher than the implementation costs, such as used material and wages, that you have deducted. This is the so-called box threshold, (boxdrempel in Dutch). 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 (the 25% tariff). 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 R&D was outsourced to a legally connected company, then the profit you can use in the innovation box is limited according to the Nexus approach. This is the result of international agreements to prevent tax evasion.
- 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 Dutch Tax and Customs Administration (Belastingdienst). Note: There is a distinction between smaller and larger taxpayers. Some conditions are the same, but there are some additional conditions for larger taxpayers. 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.
Extra conditions for larger taxpayers
The conditions above apply to all tax-paying companies. But there are two extra for larger taxpayers (grotere belastingplichtigen): Besides a R&D declaration for your innovation, you must also have one of the following:
- a patent (pending);
- plant breeders' rights (pending);
- an legal access ticket to use and sell biological plant protection products;
- 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.
If you have a patent, the profit of your innovation must be largely due (30%) to it. In the Netherlands you can apply for a patent (octrooi) at the Netherlands Patent Office.
Step 3: make sure your administration is in order
Filing for corporate tax returns is practically impossible without well-kept records. To use the innovation box the tax authorities 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, and online, via the Ondernemersportaal of the Dutch Tax Administration. You can also make use of the services of an accountant or tax advisor to file the return for you. Read more about filing your corporate tax return.
Corona crisis effect
If less time was spent on WBSO but you can demonstrate that the cause of the reduction of WBSO hours was due to the corona crisis and temporary, then contact the Dutch Tax and Customs Administration. Receiving compensation from the NOW scheme has no consequences for the innovation box. If your company built up a so-called corona reserve, it will not affect your innovation-box profit. But if you make use of the innovation box flat-rate (forfait, in Dutch) you will need to deduct the reserve. For more information, contact the Dutch Tax and Customs Administration.