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New R&D Incentive in the Netherlands
The Proposed incentive is introduced to stimulate capital intensive research and development (R&D) activities in Netherlands and is expected to come in effect from 1 January 2012. The new tax incentive is an addition to the already existing tax incentives on R&D costs. The latter includes reduction of wage tax for employee expenses related to R&D, immediate deduction of investment costs related to development of intangible assets and finally the Innovation Box regime. Under the Innovative Box regime, income from qualifying intellectual property is taxed at a reduced effective rate of 5%. Taxand Netherlands analyses the implications of the proposed incentive for the investment climate in Netherlands.
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 currently 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, the RDA percentage is expected to be 40%. This means that a taxpayer who qualifies for the RDA, can have a maximum net reduction of its corporate tax rate of 10% (the general corporate tax rate being 20-25%).
The RDA would apply only to costs incurred for, and investments made in, R&D incurred after 31 December 2011. In order to qualify for the RDA, a taxpayer has to submit a written request to the Agentschap NL. Thereafter the taxpayer is obliged to continuously 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 on the taxpayer.
The budget for this new tax incentive will be determined annually. The budget for next three years starting 2012 is expected to be EUR250 million, EUR375 million, and EUR500 million respectively.
This proposed new tax incentive will encourage R&D investments in Netherlands and improve the Dutch investment climate. The new RDA incentive allows an additional deduction of 40% calculated on R&D costs. Companies considering R&D investments should review whether they can qualify for the RDA incentive. For those who qualify, it might be worth postponing (part of) the investment until after 31 December 2011, in order to fully benefit from this new tax incentive. Moreover, companies currently benefiting from the Innovation Box regime should review whether the combination of this regime and the proposed RDA regime provides further benefits.
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