On May 19, 2016, the Netherlands Finance Ministry issued a press release, stating it has issued a consultation to amend the innovation box regime, and in turn, amend the Corporation Tax Act 1969. The consultation will end on June 16, 2016.
The innovation will reduce the effective tax rate of corporation tax for innovative activities, and therefore, will reward research and development. The innovation is intended only for companies with substantial economic presence, and that are engaged in the development of innovative activities, in the Netherlands.
OECD BEPS Action 5 discusses the nexus approach, which allows a taxpayer to benefit from an IP regime only to the extent that the taxpayer itself incurred qualifying research and development (R&D) expenditures that gave rise to the IP income. The Dutch innovation box is not fully in line with the nexus approach. The presence of substantial activities is determined on the basis of the distribution of the expenses related to R&D between companies in a group.
Only intangible assets produced by the taxpayer qualify for the innovation box. Purchased intangible assets do not qualify. The Dutch innovation box does not apply to all IP rights. Trademarks, logos and comparable assets are specifically excluded from the innovation box, as these rights do not arise from technical innovation.
The changes in the innovation box will enter into force on January 1, 2017, and intangible assets produced after June 30, 2016 must meet the requirements as of this date. All taxpayers are now required to have an R&D statement. Smaller taxpayers (costs to acquire benefits in the current year and four preceding years are less than €37.5 million and the group to which the taxpayer belongs in the current year and four preceding years has a net turnover of €250 million or less) will have a qualifying intangible asset if they have an R&D statement, regardless of nexus.
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