Tax Incentives for Innovation in Belgium and The Netherlands. Our Tutorial to What they are, and how to Leverage them in Increasing your Ingenious Company’s Value!


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R&D and innovation are crucial to solving the grand matters of our time, and the value drivers of the knowledge economy. Very important therefore, to put it mildly. That’s why Belgium and the Netherlands – as we like to be known for our knowledge economies – have multiple tax incentives for innovation, to hopefully be interesting options to establish your innovative businesses. But how exactly do the different regimes work, and how do they compare?

To answer that question, we joined forces with our Belgian friendly firm Tuerlinckx Tax Lawyers and hosted a webinar, taking you on a scenic trip through the Dutch and Belgian tax-related policies that aim to support inventive quests.

What do Tax Incentives do?

Tax incentives work to reduce corporate cash-outs in the costly R&D phase, and help reduce the Corporate Tax charge in the profitable commercialization phase. So: they help reduce your burnrate and increase your profit margins. This translates to your business value as your Net Operating Profit After Tax grows, as lower costs increase your margin and lower tax charges reduce the delta between your earnings and net profits.

This value effect makes your business you the more attractive investment proposition, helping you secure funding. And: it helps you leverage the Employee Incentive Plans we so often see being implemented in Innovative Business; when company value is the driver behind the staff remuneration package, creating more value really helps.

Innovation Incentives help facilitate valuable R&D!
Innovation Incentives help facilitate valuable R&D!

What Incentives are we Talking About?

For The Netherlands, think:

  • The “WBSO” Subdisy for R&D Activities: companies can file for the subsidy by describing their R&D projects with the Dutch Enterprise Agency, which then grants the company an hours budget. A deduction amounting to the budgetted hours spent * the issued hourly rate can be deducted from the company’s reported wage tax obligation in said month.
  • The Innovation Box for Innovative Profits: companies executing WBSO R&D Projects can apply the Innovation Box, under which a determined percentage of their profits is taxed at 9% rather than 25%.

For Belgium, think:

  • The R&D Tax Credit: companies can offset 25% of ‘a certain percentage’ (de facto 3,5% – 13,5%) of the investment in patents or environmentally friendly research and development against their corporate tax charge.
  • The Innovation Deduction: companies that have obtained patents can deduct up to 85% of the profits attributable to that patent from their tax base under the innovation deduction system. Compared with the 25% corporate tax rate, this leads to an effective tax burden of 3.75% on these profits.

These two-sided policy instruments reduce Burn Rates and increase Free Cashflows. This makes innovative firms more profitable and R&D less risky. And: these regimes are ‘2021-proof’. The G7 have explicity stated that Innovation regimes pass the test of scrutiny for favorable tax regimes, as the underlying goal is to encourage R&D that helps address the Big Issues of our time.

Further underlying policies, which are not always tax related, can support the Innovative businesses further. For instance: targeted immigration regimes help relocating and incentivizing your talented staff, and government supported Funding Incentives help Innovative Businesses to better find and secure finding funding.

And that is exactly the policy aim; we want innovation!

In the webinar, we set the European policy scene in one hour’s time, give the 101 on the respective national schemes, and put them in comparison in the fictitious case of Medtech Enterprise and their novel shampoo. You can watch it below.

More in the mood for reading? You can also download our full report on the topic here in English, and here in Dutch.

Replay webinar: ‘Tax Incentives for Innovation in Belgium and the Netherlands”

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