Dutch R&D Tax Breaks Popular In 2012

by Ulrika Lomas, Tax-News.com, Brussels

31 July 2013

The number of companies that benefited from a research and development (R&D) tax break in the Netherlands rose in 2012 for the fifth consecutive year, according to the Dutch Government.

Figures published in a government report entitled "Focus on Research and Development" revealed that last year 22,220 businesses made use of the payroll tax credit, provided for in the country's Research and Development Promotion Act (Wet Bevordering Speur en Ontwikkelingswerk – WBSO), up 8 percent compared to 2011. Furthermore, 13,860 companies benefited from the Research and Development Allowance (RDA).

Designed to encourage entrepreneurs in the Netherlands to carry out their own research rather than outsourcing, the WBSO payroll tax credit enables enterprises to pay less payroll tax on wage costs. In 2012, the maximum tax credit for research staff expenses was EUR8.5m (USD11.3m). From 2013, this figure will rise to EUR12m.

In contrast, the RDA allowance serves as an incentive for companies to invest in the development of innovative products and services. The provision allows both companies and individual entrepreneurs in the Netherlands to deduct 40 percent of R&D investment costs from profits from 2012. Businesses subject to corporate income tax at a rate of 25 percent therefore benefit from a net reduction of 10 percent. For individual entrepreneurs subject to income tax, the tax break depends on the tax rate.

Last year, almost EUR5.9bn was paid out in support of private research and development, of which EUR3.9bn was allocated to the WBSO payroll tax credit, while the remaining EUR2bn was spent on the RDA.

Small- and medium-sized enterprises (SMEs) in the Netherlands benefited most from the R&D tax shelters last year. In 2012, 97 percent of all requests for the WBSO payroll tax credit were submitted by SMEs, while 98 percent of all RDA applicants were SMEs. As in 2011, most R&D takes place in the North Brabant and South Holland regions of the Netherlands. Most money is spent on R&D in the machinery and equipment industries, followed by the telecommunications and ICT sectors.

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