What Is the Innovation Box?
The Innovation Box (Innovatiebox) is a tax measure that aims to stimulate R&D within the Dutch business community. This advantage is achieved by allowing companies, using the innovation box, to tax the part of the profit attributed to the developed technical innovations at a reduced corporate tax rate. Technical innovation comprises of a WBSO declaration and patents.
Conditions and Characteristics
- The company must own the ‘intangible assets’ that they have developed themselves, in the context of WBSO projects, in order to be able to attribute benefits to the innovation box.
- The application can be submitted continuously, as long as the tax assessment for that year has not yet been irrevocably determined.
- Maximum contribution of the innovation box is not determined. The current rate is 7% corporate income tax on profit (compared to regular corporate income tax of 16.5% or 25%).
What Will Change in the Coming Years?
From 2021 onwards, the rate of corporate tax will be reduced. Currently, the corporate income tax rate for the lowest tax bracket is 16.5% and will be further reduced to 15% in 2021. When it comes to the highest tax bracket the rate will remain unchanged. From 2021 onwards, the low rate will apply to profits up to €245,000 instead of €200,000. In 2022 this limit will be further increased to €395,000.
In addition to the adjustment of the regular corporate income tax rates, the rate of the Innovation Box will also be adjusted. The rate of the Innovation Box is now 7%, and will rise to 9% from 1 January 2021 onwards. The following table provides an overview of the changes in the coming years.
|From € 200,000||25.0%||From € 245,000||25.0%||From € 395,000||25.0%|
|Innovation Box||7.0%||Innovation Box||9.0%||Innovation Box||9.0%|
Despite the rate changes, the Innovation Box remains an attractive grant for innovative companies. The effect of the innovation box will be more limited in the future, due to the reduction in corporation tax and the increase in the rate in the Innovation Box. This results in a benefit of 9.5% (2020) to 6% (2021). However, profits in excess of €245,000 will still be taxed at 25% in 2021, which means that the 9% rate in the Innovation Box is still considerably more advantageous than the regular corporate income tax rate.
In addition, for profits of up to €245,000, a flat-rate scheme can be employed. This entails that 25% of the net profit can be allocated to the Innovation Box. Moreover, a maximum of €25,000 can be attributed to the innovation box rate, and greatly simplifies the application process.
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If you would like to learn more about the innovation box, please do not hesitate to contact us, and discuss the possibilities in a non-binding intake conversation.
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