Do you invest in technology? Discover the tax advantages for innovative businesses!
Many businesses invest in companies which carry out research and development (R&D).The Dutch government offers three financial regulations which make investing in R&D extra attractive. In the Netherlands, the WBSO (R&D Promotion Law) and the Innovationbox are available for companies which invest in qualified research. If these facilities are properly exploited, then companies and investors can gain the following advantages:
- Higher returns on investments through lower taxation pressures (value optimisation),
- Reduced R&D costs with the result that more can be invested and allow the R&D process to speed up (cash flow advantage),
- Higher sales profits on a shares transaction than without using the innovationbox,
- The interests of the owner/investor are easier to sell since the new owner buys a company with reduced taxation pressures. In this way, the company and the investor a better competitive position than companies which either don’t exploit the innovation regulations or don’t exploit them fully.
The Innovationbox, WBSO and taxation advantage
Using the Innovationbox, profits gained through the exploitation of self-developed assets are taxed at the lower 5% rate instead of the usual 25%. The intangible assets must be developed using the WBSO or these assets have been patented.
If the Innovationbox provisions can be applied then a fixed agreement is reached with the taxation department whereby the requirements for the application and the effects of the application are set for a number of years. This offers both the company and those wishing to sell the company certainty.
Using the Innovationbox can therefore mean that the effective company tax is only 15% rather than 25%. A good use of the Innovationbox therefore creates value.
The Forfeiture Innovationbox
So that small and medium businesses can profit from the Innovationbox the Forfeiture Innovationbox was introduced on 1 January 2013. Small companies find it difficult to determine which part of the profit can be linked to innovation. The Forfeiture Innovationbox allows for a maximum of 25% of the profit to be declared as forfeiture. The degree to which the innovation has contributed to profits does not then need to be determined. Profits may be no more than €100,000. This means that a maximum of €25,000 is taxed at 5% instead of the usual 20-25%. The Forfeiture Innovationbox can only be used for a maximum of 3 years for the same innovation.
Baker & McKenzie and De Breed & Partners offer an integrated approach
A combination of technical and legal financial knowledge is necessary for a good use of the WBSO and Innovationbox. Baker & McKenzie and De Breed & Partners are a strategic team in the area of these financial regulations. Knowledge and experience is bundled in this team-work and we can provide integrated advice about the application of the WBSO and Innovationbox such that the owner/investor’s goals are central (value optimisation, better cash-flow etc.)
Do you want to learn more about the Innovationbox? Then please contact De Breed & Partners.