Research & Development Allowance, change of the 30% ruling and new tax treaties

As of 1 January 2012 the Research & Development Allowance (‘RDA’) has become effective. The RDA is regarded as an additional deductible item when determining the profit for tax purposes. It relates to expenses and expenditures that are directly allocable to research and development that the taxpayer performs, except for wage costs. The RDA is closely linked to the implementation of the wage tax incentive called WBSO. The authority issuing the R&D declaration in case of WBSO, Agentschap NL, will also be responsible for issuing RDA declarations.

Expenses are considered to be “all amounts paid for the realisation of proprietary R&D activities”. Expenses for contract research, financing expenses and depreciation expenses are not eligible. The expenses are required to solely be used for performing R&D activities. Examples in this respect are the purchase of consumer goods, materials, raw materials, purchasing knowledge or services from third parties, the purchase of licenses for specific software packages or ICT tools.

Expenditures are considered to be “everything paid for the acquisition of newly manufactured business assets” which are used for the R&D activities. Expenses relating to acquisition of land or land improvement are not considered to be expenditures. Investments eligible for energy investment relief or environmental investment relief have likewise been exempted. Examples in this respect are (sharing) buildings, equipment or instruments, ICT assets. In case the expenditures exceed € 1M per business asset, 20% of that expenditure will be taken into account per year for a maximum of 5 years.

The RDA rate for 2012 has been set at 40%. In case the WBSO-hours are 150 per month or less, the total RDA expenses and expenditures are set at € 15 per WBSO-hour.

The application for RDA as regards the year 2012 can be filed as from 1 May 2012, but at the latest on 31 May 2012. Expenses and expenditures incurred or to be incurred in the period through 30 June 2012 can be included in this application. As from 1 July 2012, the application procedure for the RDA runs parallel to the application procedure for the R&D statement.

30% ruling

As of 1 January 2012, the rules for the so called 30% ruling have changed. The 30% ruling is a special kind of ruling, originally meant for expatriates. If the ruling is granted by the Dutch tax authorities, an employer is allowed to reimburse an employee 30/70 of his / her salary (excluding the 30% remuneration) tax free. The 30% ruling is a compensation for so called extraterritorial costs (such as double housing costs, travel expenses, etc.).
The new rules contain the following:

1. Introduction border area
Only cross border employees who live for at least 16 out of 24 months, before they start their employment activities in the Netherlands, outside 150 km of the Dutch border can apply for the 30% ruling. This rule is not applicable to PhD students / PhD holders who start their employment activities within one year after they obtained their doctorate and who lived in the Netherlands or within 150 km of the Dutch border during the time they were obtaining their doctorate.

2. Fixed salary norm
Specific skills test will be based on a (fixed) salary norm only
(€ 35,000 per year, excluding 30% remuneration). Nontaxable items will not be taken into account. This salary norm must be met for the entire period the 30% ruling is granted. As soon as an employee does not longer meet this norm, the 30% ruling will expire.

3. Adjustment rules relating to reduction applicable period
Periods of early stay / employment during the last 25 years are deducted from the maximum application period. Especially Dutch employees are effected.

4. PhD students / PhD holders and young professionals (masters) up to 30 years old
To PhD students / PhD holders and young professionals (masters) up to 30 years old, a different (fixed) salary norm applies (€ 26,605 per year, excluding the 30% remuneration). No salary norm applies to scientists and research workers at subsidized establishments.

5. Reference period
The reference period will be reduced from 10 to 8 years

New tax treaties

The Netherlands concluded new tax treaties with Switzerland, Japan and Hong Kong. The provisions of the treaties became effective for any taxable years and periods beginning on or after January 1, 2012 in the Netherlands.
The new tax treaties should allow for advantageous tax planning between the countries. The major changes under the new treaties are listed below.

Switzerland

Under the new treaty with Switzerland, the percentage holding in order to qualify for a 0% dividend withholding tax, provided that certain conditions are met, is reduced from 25% to 10%. Furthermore, a 0% withholding tax rate applies under the new treaty on interest and royalties.
The new treaty between the Netherlands and Switzerland also enables the tax authorities to submit a request to exchange information in tax matters and contains several other changes that may be relevant for different situations.

Japan

Under the new tax treaty with Japan, the withholding tax rate on dividends is, provided that certain conditions are met, reduced to 0%, on royalties to 0% and on interest to 10%.

Hong Kong

The new treaty with Hong Kong allows under certain conditions reduction of the withholding tax rate on dividends to 0%. The withholding tax rate on royalties in Hong Kong is reduced to 3% under the new treaty. Furthermore, a 0% withholding tax rate applies on interest.
The new treaty also contains a provision in relation to the information exchange. The new treaty should further improve the economic ties between the Netherlands and Hong Kong.

For more information please contact Michiel de Jonge of Deloitte Belastingadviseurs BV at midejonge@deloitte.nl or +31 (0)88-2880790