The taxation of Intellectual Property in Netherlands

The Netherlands offers significant taxation discounts on Intellectual property (patents, copyrights, software, etc.) related businesses. In 2010, the Dutch government had decreased the amount of intellectual property related taxes, from 10% to 5%. Compared to the international practice (IP Box, Patent Box), they named their own, beneficial tax system “Innovation Box”.

Our previous articles introducing offshore or low taxation options  for different IP Box regimes:

– Offshore copyrights, patents and intellectual property
– Taxation of intellectual property in Malta
– Taxation of intellectual property in Cyprus
– Preferential taxation of intellectual property and patents in Luxembourg 

The Dutch Innovation Box system works like this: Intellectual property related profit, what is higher than certifiable expenses (R&D expenses, other burdens, amortization, etc.) are taxed at the rate of 5%. This is a huge discount, compared to the average Dutch corporation tax, which is 25%. It’s still huge, compared to what the previous Patent Box system offered, because it was only 10%. Intellectual property related incomes are suited for tax discounts. This involves profit from sold products, patents, and capital gains. Low taxation is easily achievable, since the government had abrogated the quantity limit. Before 2010, this option was only available for research expenses, and only with a limit of four times the amount spent on the research. But in the Innovation Box system, there is no limit on the money involved in the discount.

Those company can apply for lower tax rates, who owns intangible assets. There is another option to achieve lower tax rates, but it needs an R&D certification filled out by the Dutch Ministry of Foreign Economic Affairs. This certification can only be requested in special cases, such as for having software related intellectual property, or trade secrets. In case of patents, the claimer must have at least 30% share from the expected income, but this share, cannot be
higher than 70%, even if it’s combined with other revenue-generating tools (like marketing know-hows). The Dutch tax discount does not apply on marketing and brand related assets. Since, the 5% corporation tax only applies for activities in accordance with the book, normal tax rates goes for the rest of the income.

By knowing this, it’s not surprising, that most multinational companies favoring the Dutch Innovation Box system. Especially because it can contain foreign research and development activities, so it’s easier to get lower prices and tax discounts.