Innovation Box 2021
Lowers the corporation tax for profits from innovative activities > Innovation Box. These profits are only taxed at a maximum tax rate of 9%.
The reduced tax rate of 9% instead of 25% increases the return of companies on R&D investments. The reduced R&D costs allow companies to invest more, which speeds up the R&D process. This causes the organization to increase in value.
How does Innovation Box work?
Who can use Innovation Box?
Every company that can demonstrate sufficient investment in innovation is eligible for a tax reduction through the innovation box. This may involve Research & Development (R&D) or improving existing products or processes. It is important that you first take a good look at the financial benefit it brings before you apply Innovation Vox.
What are the conditions?
- A WBSO decision
- Depending on the sales size or industry, a patent may or may not be required:
Mandatory: for the ‘small’ taxpayer (less than €50 million net group turnover per year and a net turnover from innovative assets of less than €7.5 million per year), a WBSO decision is imperative for access to Innovation Box.
Not required: a patent is not required for an IT company (but it is possible to apply for a patent for IT!).
Mandatory: for a “large” taxpayer, in addition to a WBSO decision, a patent (or a similar right) is also required.
- A settlement agreement is drawn up in collaboration with tax authorities
How much is the tax benefit?
Innovation Box offers a special rate within corporate income tax. Profits that qualify for Innovation Box are taxed at a low corporate tax rate of 9% instead of the usual rate of 15 or 25%. Innovation Box can lead to the effective corporate tax rate not being 25% but, on average, approximately 16%.
Flat-rate Innovation Box
To allow SMEs to benefit more from Innovation Box, the flat-rate innovation box has been introduced. This flat-rate method has been created for companies where the benefits do not outweigh the administrative burden of determining the attributable benefits. This measure makes it possible to declare a maximum of 25% of the profit as a lump sum. It is then unnecessary to determine to what extent the innovation has contributed to profit. The maximum eligible profit is €100,000. This means that a maximum of €25,000 is taxed at 9% corporation tax, instead of the usual 15% or 25%. The flat-rate innovation box may be used for the same innovation project for a maximum of 3 years.
For your company, the 2021 financial year is the same as the 2021 calendar year. Qualifying benefits amount to a total of €2,000,000.
The amount on which you calculate the corporation tax:
(9/25) x 2,000,000 = €720,000
Up to and including € 245,000, the corporate tax rate is: 15%.
From €245,000+, the corporate tax rate is: 25%.
In this example, the corporation tax that you have to pay is €155,500.
An integrated approach
For a proper application of the WBSO and Innovation Box, a combination of technical knowledge and fiscal legal knowledge is necessary. Baker & McKenzie and De Breed & Partners have entered into a strategic partnership in the field of these tax arrangements. Thanks to this, our united cooperation, knowledge, and experience offer you integrated advice regarding applications for WBSO and Innovation Box.
Want to know more?
Do you want to know more about the Innovation box? Get in touch with consultant John Dalenoord. He is happy to help you further!