Dutch Research and Development (R&D) Funding – Part 1: How and Where?
The Netherlands is a melting pot of bright and bubbling business ideas. As one of Europe’s innovation leaders, the Dutch Research & Development (R&D) sector is a well-nourished aspect of the whole economic system. Innovative business in the EU has been on a steady incline since 2012 and R&D funding aims to match this growth with the respective provision of tax deductions, capital investment and resources.
Start-ups thrive on innovation, so by their very nature, they are in prime position to receive R&D investment. We’re going to take a look at everything you need to know about the available options for Research and Development funding in the Netherlands.
In the following article of the series, we will discuss the essential things to make you unique, which improve your chances of R&D investment.
Netherlands Enterprise Agency (NEA)
Most sources of R&D funding have the Netherlands Enterprise Agency (NEA) as their middle man. The main aim of the NEA is to provide “financial facilities for innovation projects and programmes”. As such, this agency acts as buffer between larger funding organizations and smaller, national scale (sometimes internationally oriented) business operations.
Research and Development Tax Credits (WBSO)
These tax credits are applicable to anyone who carries out Research and Development projects. Their budget for 2021 is €1.438 million. You can follow this simple government-created ‘quickscan’ to see if you are eligible.
The WBSO (Wet Bevordering Speur- en Ontwikkelingswerk) approach is diverged across two key areas:
1. Development Project:
- New technical physical products.
- Physical production software and processes.
2. Tech-science Research:
- Explanatory research of a technical nature.
Costs covered by the WBSO
- R&D activities carried out by you and employees.
- Costs and expenses incurred during R&D project(s).
This statement is a necessary step in receiving any R&D tax credits.
It requires that you fill out the amount of time (hours) spent on Research and Development along with the costs incurred (if these are available) on a yearly basis. R&D hours spent on projects for which a WBSO statement has not been completed are ineligible and will thus receive no benefits.
Tax Credit benefits: Individuals vs. Start-ups
Lower wage tax liability for start-ups through the share option scheme:
As a start-up, you may withhold 75%, rather than 100% of this benefit when award share option rights are granted to employees AND the employees exercise or alienate these rights without the benefit exceeding €50.000.
See the conditions for approval here.
Customary Salary Scheme:
Applies to those employed by private, limited-liability company in which they entertain a substantial interest. May apply the statutory minimum wage as the customary salary or use the salary for the position most similar if this is lower.
See conditions for approval here.
To apply for this, you have to demonstrate to the WBSO that you came up with the innovation yourself. If done so, the outcome is lower income tax for your innovative business venture. Proceeds from an innovative business will not be taxed at 25%, but a mere 9% if you satisfy the conditions for the Innovation Box.
The primary step in this process is applying for the R&D tax scheme through the WBSO. Once you have this declaration the next step is to prove that your company was responsible for the Research and Development of this innovative business venture. Check here and look under the heading “Step Two” to see if you meet the conditions.
- Keep a thorough administration on your accounts that clearly shows your investments towards your innovative research.
- Make sure that profits are easily interpretable and linked to the innovation work.
- Clearly separate different innovations if you are applying to the Innovation Box for multiple ventures.
After all this, it might start to make sense why the Netherlands is a leading force in the race towards innovative business solutions. Most of the areas discussed in this article focus on national support networks that are incentivized by the Dutch government.
The Horizon 2020 project in the next article also highlights the potential for international funding and network opportunities. The best thing is that if your project has an international orientation, you may be in prime position to receive funding from both the EU commission and national support systems from the Netherlands.