The Dutch Patent Box
As from 1 January 2007, Dutch tax law provides for a special tax regime for Research & Development activities in relation to patents.
This optional regime can only be applied for by the taxpayer in connection to income derived from self-developed intangible assets, including plant breeder’s rights, which are patented in The Netherlands or abroad (but according to Dutch standards) and which are capitalized after 31 December 2006. As of 1 January 2008 this regime will also apply to so called R&D intangibles (“Speur- en Ontwikkelingswerk activa”), originated from a so-called R&D project for which a “R&D declaration” has been obtained. Self-developed trademarks, logos and other similar assets are excluded from the patent box.
An effective tax rate of 10% is achieved by using the following formula: 10/25.5 (regular corporate income tax rate) of the total amount of net earnings stemming from the intangible asset that has been allocated to the patent box is recognized as taxable profit which is taxed at the regular corporate income tax rate.
The total amount of net earnings from intangibles that could be taxed at the low rate cannot exceed a threshold of four times the total amount of the capitalized development costs of the intangible assets allocated to the patent box. Note that for budgetary reasons the amount of net earnings derived from R&D intangibles is capped at EUR 400,000 per year.
Tax Resume
There is no withholding tax on royalty payments made by a Dutch company to a non-resident and, as with interest payments, many of the tax treaties signed by The Netherlands allow foreign companies to make royalty payments to a Netherlands company without a requirement to withhold tax or subject to only a reduced rate of withholding tax. Where the Dutch company is related to the payee or payer then a margin on basis of a sliding scale ranging from 2%-7% (6% for lump sum payments and film royalties) must be maintained between the royalties received and the expenses paid out. The amount of this margin would be taxable at normal Dutch rates but the balance of the royalties received will escape Dutch taxation.