01-11-2011
New research and development incentive in the Netherlands

In the Tax Plan for 2012 a new tax incentive was introduced, the research & development deduction ("RDA"). Details on the RDA are now becoming clear through the recent publication of an amendment of the Tax Plan.

This proposed new measure is introduced in order to stimulate capital intensive research and development (R&D) activities in the Netherlands and should take effect as of January 1, 2012. The new tax incentive is an addition on the already existing tax incentives on R&D costs such asthe reduction of wage tax for employee expenses related to R&D and the immediate deduction of  investment costs related to  development of intangible assets. And finally the Innovation Box regime in which income from qualifying intellectual property is taxed at a reduced rate of effective  5% corporate tax.

With this new R&D deduction, the Dutch tax system further encourages R&D investments in the Netherlands and will therefore improve the Dutch investment climate.

Tax news
The proposed RDA incentive will provide a deduction to costs and investments directly related to R&D, other than wage costs, and is an additional deduction calculated over costs and investments that are already deductible or depreciable.

The Ministry of Economic Affairs, Agriculture and Innovation ("Agentschap NL") will determine what amount of relevant costs and investments will qualify for the RDA. A percentage will apply to this amount and the final amount will be stipulated in a formal RDA decision. The amount stated in the RDA decision will be deductible from the taxable profit. For 2012 a RDA percentage is expected of 40%. This means that a  tax payer, who  qualifies for the RDA, can have a net reduction of its corporate tax rate of maximum10% (the general corporate tax rate is 20-25%. For entrepreneurs taxable under the Dutch Income Tax Act, the amount of the effective reduction depends on the relevant income tax-bracket, considering the progressive rate under this Act.

The RDA only applies to costs incurred for, and investments made in, research and development incurred after December 31, 2011. In order to qualify for the RDA, a taxpayer has to submit a written request to the Agentschap NL. Subsequently, a taxpayer has an obligation to continue to provide correct information to the Agentschap NL and keep records. In the event a taxpayer fails to fulfil these obligations, and as a result thereof an incorrect RDA amount is being determined by the Agentschap NL, a penalty can be imposed to the taxpayer.

The budget for this new tax incentive will be annually determined. The budget for 2012 is expected to be € 250 million, whereas the budget for 2013 is expected to be increased to € 375 million, and as of 2014 the budget is expected to be € 500 million.

What can VMW Taxand do for you?
This proposed new tax incentive will encourage R&D Investments in the Netherlands and improve the Dutch investment climate. Due to this new RDA incentive an additional deduction of 40% can be calculated on R&D costs. For companies considering R&D investments, it is advisable to review whether they can qualify for the RDA incentive. In case they qualify, it might be worth to postpone (part of) the investment after December 31, 2011, in order to fully benefit of this new tax incentive. Companies currently benefiting from the Innovation Box regime should review whether the combination of this regime and the proposed RDA regime provides further benefits.

VMW Taxand can assist companies with the RDA application procedure and the other R&D incentives in order to optimize their investment in the Netherlands.

More information
For more information you can contact Angelo Spadaro at +31 20 301 66 33 or angelo.spadaro@vmwtaxand.nl.