In 2007 the Netherlands introduced an Intellectual Property (IP) regime called "Patent Box" in its efforts to establish itself as an IP jurisdiction. In 2010 the Netherlands further improved its Patent Box and renamed it to "Innovation Box".
Under the Dutch Innovation Box a deduction of 80% is given on the net taxable profit from qualifying intangibles to the extent that income from the intangible exceeds the related Research and Development (R&D) expenses, other charges and amortization of the intangible.
The remaining profit is taxable at the ordinary corporate tax rate of 25%, thus resulting in an effective tax rate of 5% (= [(100% - 80%) x 25%].
Before the profits can actually be taxed under the above effective rate of 5%, the income should exceed the costs of development of the intangibles.
Any expenses or losses from the intangible are tax deductible.
Qualifying profit - means all economic benefits derived from the intangible, including royalty income but also capital gains and profits from products developed.
Maximum amount of benefits - there is no maximum amount of benefits that a taxpayer can obtain from the Dutch Innovation Box.
Qualifying intangibles - the Dutch Innovation Box applies to intangibles which have been self-developed by the taxpayer and for which a Dutch or foreign patent was granted or which originate from R&D activities for which a qualifying "R&D Declaration" has been received. An R&D Declaration (certificate) is granted from the Dutch Ministry of Finance (helpful for companies that do not intend to apply for a patent on their R&D efforts). The taxpayer must be the registered and beneficial owner of the patents and the beneficial owner of the related intangible assets.
Acquired intangibles - as stated above, the Dutch Innovation Box applies to self-developed intangible assets. However, acquired intangibles can also benefit from the Dutch Innovation Box if further developed by the Dutch taxpayer. Thus existing intangibles can be transferred to the Dutch company or the company that owns the intangibles can migrate to the Netherlands and take advantage of the Dutch Innovation Box. Upon transfer to the Netherlands the intangible will be recognised at fair value may then qualify for the Dutch Innovation Box.
Tax Ruling - it is advisable that the application of the Dutch Innovation Box is confirmed via a tax ruling from the Dutch Tax Authorities. This will provide the taxpayer with the necessary certainty on its specific facts and circumstances.
The information provided in this article is for general information purposes only. The information is not intended to be comprehensive or to include advice on which you may rely. You should always consult a suitably qualified professional on any specific matter.
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