Global Tax Alert | 17 December 2013

Dutch Minister of Economic Affairs increases research and development allowance

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Executive summary

The Dutch Government recognizes the importance of innovation for companies and has introduced a number of incentives for Dutch taxpayers to perform research and development activities (R&D). On 9 December 2013, the Dutch Minister of Economic affairs amended one of these incentives, the so–called R&D Allowance (RDA). Under the amendment – which will be applicable for the calendar year 2014 – the incentive is being improved and taxpayers can now deduct an additional 60% for qualifying R&D-costs and expenses, resulting in a net tax benefit of 15%.

Detailed discussion

Background

Over the past few years, the Dutch Government has introduced a number of incentives for Dutch taxpayers to perform R&D activities. Since 2007, a special tax regime is in place that reduces corporate income taxation on income that is derived from qualifying R&D (Innovation box). Furthermore, the so-called WBSO (Act on stimulating R&D) is available which offers a payroll tax reduction for employers in relation to innovative activities. Finally, in 2012 the RDA was introduced which allows an additional corporate income tax deduction for R&D costs and investments.

Research and Development Allowance

The RDA grants the taxpayer an additional deduction for R&D-costs (not being labor costs) and expenses that are directly related to R&D projects. The additional deduction will lower a company’s taxable profit and thus the corporate income tax due, or increases tax losses which may be used to off-set taxable profits from the previous year or the nine successive years. For 2013, the additional deduction was determined at 54% of the qualifying costs and expenses.

Additional deduction for 2014

The Dutch Minister of Economic Affairs has increased the additional deduction on R&D-costs to 60% as from 1 January 2014 through 31 December 2014. The Dutch corporate income tax rate being 25%, this results in a net tax benefit of 15%.

Implications

With the further increased RDA, taxpayers contemplating R&D projects should review the various incentives for innovation in the Netherlands to identify potential benefits and understand the application of incentives.

For additional information with respect to this Alert, please contact the following:

Ernst & Young Belastingadviseurs LLP, Amsterdam
  • Johan van den Bos
    +31 88 407 1457
    johan.van.den.bos@nl.ey.com
Ernst & Young Belastingadviseurs LLP, Rotterdam
  • Michiel Swets
    +31 88 407 8517
    michiel.swets@nl.ey.com
Ernst & Young LLP, Belgium-Netherlands Tax Desk, New York
  • Dirk Stalenhoef
    +1 212 773 3390
    dirk.stalenhoef@ey.com
Ernst & Young LLP, Belgium-Netherlands Tax Desk, Chicago
  • Frank Schoon
    +1 312 879 5508
    frank.schoon@ey.com
Ernst & Young (China) Advisory Limited, Belgium-Netherlands Tax Desk, Shanghai
  • Bas Leenders
    +86 21 2228 4782
    bas.leenders@cn.ey.com
Ernst & Young LLP, Dutch Tax Desk, London
  • Jelger Buitelaar
    +44 20 795 15648
    jbuitelaar@uk.ey.com

EYG no. CM4042