Determining the Netherlands IP regime under Action Plan 5

As from 2017, the Netherlands has altered the preferential IP regime to comply with Action Plan 5 of the OECD BEPS project.

Recently we have prepared and negotiated several new rulings under the new Dutch Innovationbox rules. The rules have been altered in order to comply with the international standards, set in Action Plan 5 of the OECD BEPS Project.

The consequences for our larger clients mainly focus on a better and more elaborate substantiation of the income allocable to the Innovationbox. First of all, it is of importance that companies need to have their transfer pricing policies well documented and in line with the OECD TP Guidelines before they even start negotiations with the Dutch Tax Authorities. Furthermore, the larger companies need to demonstrate that patents, utility models or the like can be allocated to the income, qualifying for the Innovationbox and that the income derives from R&D activities for which a so called R&D declaration has been granted (such declaration is granted in order to get a relief of wage tax withheld). And finally, the challenge is to calculate allocable income at the right level of aggregation. In practice, this often means a calculation method based on the EBIT of a product group.