1) Which IP is included in the regime?
The Dutch IP innovation box applies to profits derived from intangible assets out of self developed granted patents and breeders rights. The company which intends to apply the innovation box for its intangible assets must have born the risks and expenses of the R & D activities which have resulted in the granted patent.
It is in principle not relevant which patent office has granted the patent. Both patents which have been granted according to the Dutch procedure and via an international (foreign from a Dutch point of view) procedure are applicable for the Dutch innovation box. The same applies with respect to the place where the R & D activities, which have resulted to the granted patent, have been executed as long as the company bore the risks and expenses of these R & D activities. The regime is compatible with EU law.
Besides profits from granted patents the innovation box is also applicable for non patented IP for which a so-called R & D activities certificate has been granted to the taxpayer by the Dutch ministry of Economic Affairs. This R & D certificate is proof of the innovative character of the non patented IP. When a company has for example developed new software (applications) during a R & D project for which it was granted a R & D certificate there arises, with approval of the Dutch tax authorities, the possibility to contribute the net profits out of this asset into the innovation box. Besides, if the taxpayer is issued a R & D activities certificate for its R & D activities, the taxpayer is eligible for a payroll tax and social security remittance reduction.
2) Effective tax rate of 5%
When there is complied with the conditions of the Dutch IP patent box net profits which are derived from granted patents are unlimitedly taxed against the corporate income tax rate of 5%. A company with self developed (non) patented IP can claim the 5% tax rate after all the costs which can be allocated to the (non) patented IP have been recovered.
Foreign withholding taxes which were withheld on royalty or license fee income coming from a source country outside The Netherlands can be credited (maximum 5%) with corporate income tax due on the innovation box profits making the effective tax rate even lower than 5%.
April 2, 2013