As innovation is vital to the Dutch knowledge economy, the Dutch government is keen to provide encouragement in both technical and other areas. The Research and Development (Promotion) Act (in Dutch: Wet Bevordering Speur- en Ontwikkelingswerk, or WBSO for short) and the innovation box were created to serve precisely that purpose. These are attractive tax facilities that enable you to achieve significant tax savings.
WBSO – Allowance for wage costs related to Research & Development (R&D)
The WBSO is a tax facility that provides partial compensation for wage costs related to R&D, by reducing the payroll tax to be paid. The reduction on wage costs related to R&D could be as high as 32% and even increases up to 40% for start-ups.
An application under the WBSO is possible for R&D activities that are technically new to your company and concern:
- technical scientific research;
- technical product and process development (development of physical products and production processes);
- technical and organisational feasibility studies for R&D projects;
- technical research targeting significant improvements in a production process.
In addition to the payroll tax reduction available under the act, the WBSO also gives access to the innovation box.
Entrepreneurs liable to pay income tax will be able to apply a deduction of €12,623 (2018). In order to qualify, they must fulfil the hours criterion and spend a minimum of 500 hours in the calendar year on activities that have been designated as research and development in an R&D statement as defined in the Salaries Tax and National Insurance Contributions (Reduced Remittances) Act (in Dutch: Wet vermindering afdracht loonbelasting en premie voor de volksverzekeringen).
The innovation box – A reduction in corporation tax
Through the innovation box, profits from innovative activities are taxed at a favourable corporation tax rate of 5%. This is provided that the relevant profits were generated from an intangible fixed asset developed in-house under the WBSO heading, such as a product, process or software program (which has been patented). Contrary to the research and development allowance, the innovation box is not available to entrepreneurs in respect of income tax.
Would you like to know whether your company qualifies for the innovation box? We can carry out a quick scan and advise you on the options available to your company.