On 19 May 2016 the Dutch Government launched a public internet consultation regarding a legislative proposal in relation to changes to the current Dutch innovation box regime. It is expected that the new rules for the Dutch innovation box regime will enter into force as of 1 January 2017 and apply to financial years starting on or after 1 January 2017.

The public is asked to respond to the legislative proposal before 16 June 2016. After that date the legislative process will start shortly.

The current innovation box regime & proposed changes

Income from patents and certain other research and development (“R&D”) intangibles that originate from R&D can benefit from a lower effective tax rate under the innovation box regime. Companies eligible to apply the innovation box regime can benefit from an effective tax rate of 5% for income from qualifying intangible assets. We note that the general corporate income tax rate is 25%.

The innovation box is intended only for taxpayers with a substantial economic presence in the Netherlands. To secure this, the current Dutch innovation box regime requires the innovative activities to be carried out by the taxpayer in the Netherlands (substance requirement). In Europe there are currently 12 countries which have a preferential tax regime with respect to income from intangible assets. Not all these regimes have included such substance requirements, to ensure that only innovative companies with real substantial economic presence in that country can benefit from the regime.

The general idea is that preferential tax regimes such as IP regimes can become (part of) harmful tax practices when the taxation is not in line with the economic activities. In its effort to counter harmful tax practices, the OECD introduced the Action Plan on Base Erosion and Profit Shifting (BEPS). In Action Plan 5: Countering Harmful Tax Practices, the OECD introduced the so called modified nexus approach. The proposed legislation is an implementation of this BEPS report.


The Dutch innovation box regime does not fundamentally change if the proposed legislation should be adopted. However there are a few aspects deviating from the current innovation box regime. We will elaborate on these changes below.

Entry ticket

Under the new regime a taxpayer can only apply the innovation box for intangibles that originate from activities for which a R&D Declaration (S&O Verklaring) is granted by the Ministry of Economic Affairs. Independent access solely through a patent or plant breeders' rights is no longer possible.

In addition to the R&D Declaration, an additional condition applies for companies with (a) more than EUR 50 million global group-wide turnover and (b) at least EUR 7.5 million per year in gross revenues from all IP assets. For these taxpayers the intangible assets should also qualify as one of the following:

  • software program;
  • patent;
  • plant breeders' rights;
  • authorization for the marketing of a medicine / drug; or
  • an exclusive license to use the above listed intangible assets. 

Qualifying income

Under the proposed legislation the qualifying income has to be determined per qualifying intangible asset (or per ancillary group of intangible assets). However, if it is not possible to determine the qualifying income per asset (or ancillary group of assets), the qualifying income can be established by taking into account the R&D activities and the essence of the business enterprise of the taxpayer. Therefore, the general methods used under the current innovation box regime will remain applicable.

Modified nexus approach 

Under the proposed regime qualifying income determined on the basis of the above mechanism can be limited if, and to the extent that, a taxpayer has outsourced part of its R&D-activities to a company within its group. This is the so called modified nexus approach, that was introduced in BEPS Action Plan 5.

If the taxpayer outsourced R&D to a group company, the qualifying income is limited based on the proportion of qualifying R&D expenses incurred by the taxpayer in relation to the overall R&D expenses incurred by the taxpayer in respect of the relevant intangible asset. These qualifying expenses may be multiplied with 1.3. Under these rules, companies which allow limited outsourcing of R&D to group companies, would in general not be affected by the modified nexus approach.

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Grandfathering rule 

A grandfathering period will be applicable to qualifying intangible assets which have been developed before 30 June 2016. The current Dutch innovation box regime will remain applicable to income generated with these assets. The grandfathering period will end as of financial years which start on or after 1 July 2021.


We recommend taxpayers currently applying the innovation box regime to verify if the revised innovation box regime will remain applicable for them. If you have any questions regarding the proposed regime, or if you wish to submit a response to the consultation, we would be pleased to assist you.