Innovation and financial incentives

The historical, intimate and green character of the region has always spurred innovation and creativity. This is the province that produced, among other, world-class architects such as Gerrit Rietveld and artists like Dick Bruna, creator of the cartoon character Miffy. There are several ways in which the national and regional government works to stimulate innovation. At the national level, companies can apply for several financial incentives and subsidies. At the regional level, the Taskforce Innovation Utrecht helps innovative companies, most specifically in the application for subsidies.

Financial incentives

• WBSO

  • The WBSO provides a fiscal incentive for companies that conduct R&D work (i.e. technical/scientific research, the development of technologically new physical products or physical production processes, and the development of technologically new software). 
  • If your company qualifies for a so-called R&D certificate (“S&O-verklaring”) granted by Agentschap NL (a Dutch government agency), the Dutch Tax Authorities rebates part of the R&D-related payroll costs by reducing the amount of payroll tax and social security contributions. For 2011, a reduction of 50% applies for the first EUR 220,000 of R&D-related payroll costs, with an 18% reduction for R&D-payroll costs above EUR 220,000. The maximum rebate per taxpayer will be € 14,000,000.
  • The incentive is in the form of a reduction of wage tax and social security payments. For 2010, the allowance amounts to 50% of the first €220,000 of the R&D wage expenses, and 18% of the remaining R&D wage expenses. The maximum allowance per company is €14 million per calendar year.
    

• 5% Innovation Box
  This favorable tax incentive for innovation activities was introduced on January 1, 2007. At that time the incentive was referred to as the Patent Box and it offered a 10% effective corporate income tax rate for the net income derived from qualifying self-produced intangible assets. The effective tax rate was reduced even further to 5% as of 2010 and the name was changed to the innovation box. The 5% effective tax rate is a significant reduction compared to the 2011 corporate income tax rate of 25.0% (with a step up rate of 20.0% for the first € 200,000 of profit).
  
  The innovations box is applicable to a wide range of technology-based innovations. For example, profits attributable to an invention, production method, software development or development or improvement of a product qualify for the 5% tax rate. However, to access the regime, the taxpayer must have either (i) a patent (“octrooi”) or plant breeder's right (“kwekersrecht”) or (ii) an R&D certificate (“S&O-verklaring”). Trademarks, logos and similar related rights are excluded.
  
  In practice, many more businesses than expected meet this admission requirement. In our experience, the Dutch Tax Authorities is very keen to ensure the success of the innovations box, and is favorably disposed to concluding agreements with the business community. 
  
  For more information see www.answersforbusiness.nl. Please feel free to contact us for more detailed information. For policy tools Ministry of Eonomic Affairs 2010 click here.