FD: “Tax benefit of €2.9 billion for innovation hardly reaches smaller companies”
An analysis by the FD shows that the Dutch innovation box, a tax scheme that taxes profits from innovation at a lower tax rate, primarily benefits large enterprises.
Of the total tax benefit of approximately €2.9 billion, an estimated 95% goes to just ten large companies. The Ministry of Finance is therefore investigating how smaller companies can benefit more from the scheme.
The Innovation Box is intended to stimulate research, development, and innovation in the Netherlands. Although approximately 80% of users are SMEs, they receive only a small share of the total tax benefit. Large enterprises with profitable patents, software, or other intellectual property rights benefit by far the most from the scheme.
The FD builds on earlier research showing that a very large portion of the tax benefit ends up with companies such as ASML, MSD, and Booking.com. Critics argue that this makes the scheme less effective as an instrument to stimulate innovation in smaller, growing companies. Proponents point out that the innovation box is also intended to bind innovative international companies to the Netherlands and keep the business climate attractive.
Bas Langelaar, founder of Vectrix, which helps companies apply for innovation subsidies such as the Innovation Box, states in a response that it is not surprising that smaller companies receive less from the Innovation Box. Only companies that hold patents or successfully utilize the WBSO subsidy (wage cost subsidy for research and development) and are profitable benefit from the Innovation Box. Many innovative growth companies are not yet profitable and/or still have (large) deductible losses, meaning it does not (yet) yield an immediate financial benefit. To allow smaller, profitable companies to benefit more from the Innovation Box, the government could consider granting a higher tax benefit on profits up to, for example, €1 million. A ceiling could also be set on the profit eligible for the Innovation Box if the government believes that too much money is ending up with a limited number of companies.
Want to know more about the WBSO scheme or the Innovation Box ? Feel free to contact us.
