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Netherlands
Phase: Anticipation
Tip:
  • Employment incentive
  • Fostering innovation
Ultima modificare: 09 April, 2019
Nume nativ:

Wet Vermindering Afdracht Loonbelasting en Premie Volksverzekering, Onderdeel Speur en Ontwikkelingswerk (WBSO)

Denumirea în lb. engleză:

Law on the reduction of wage tax and national insurance in favour of research and development work

Coverage/Eligibility

The measure is targeted at entrepreneurs and research institutions in the Netherlands planning to undertake R&D for commercial purposes. The enterprise can be of any size and can be working in any business field. The WBSO distinguishes between enterprises which employ staff and withhold payroll taxes (‘inhoudingsplichtigen’) and are subject to company taxation; and the self-employed (working on R&D for at least 500 hours per year) who are subject to wage tax (‘belastingplichtigen’). This reflects the differences in the way these forms of business organisation are treated from a fiscal point of view (see section on 'main characteristics' below). 

    WBSO is only available for employees employed by the business (as required by Dutch employment legislation). It cannot be used for temporarily contracted staff, or for outsourced research.

    With a clear market orientation, the measure only establishes broad guidelines regarding the type of eligible innovation activities to be performed (development projects and technical scientific research), while allowing enterprises to choose what specifically they want to research and how. If on one hand the measure does not pre-define sectors in which the R&D is to be carried out, on the other it focuses on R&D aiming to result in products, processes or components including software. Given the type(s) of innovation supported, it is expected that there will be mainly physical outcomes, so the research will be mainly in areas falling under the physical sciences and related fields, such as ICT and engineering.

    There are no region-specific aspects related to this tax measure, which applies across the Netherlands.

    Main characteristics

    The WBSO is the main tax credit measure in support of innovation operating in the Netherlands. 

    The overall objective of the WBSO is to increase R&D in the Netherlands by reducing taxes on wage and salary costs for staff working on approved R&D. Increased R&D is also expected to increase the competitiveness of enterprises and the development of knowledge and technology are expected to generate positive external effects, ensuring that social benefits are greater than private benefits. By making the measure widely available, the aim is to drive the development of an innovation culture in the Netherlands.

    Two types of projects are eligible for WBSO support: development projects which concern the development of technically new (components of) physical products, physical production processes or software; and, technical scientific research, which concerns explanatory research that is technical in nature. These are always based on the principle that the applicant is the party that carries out the work.

    Beneficiaries of the measure can deduct the tax benefit in their tax return to the Netherlands Tax and Customs Administration. Companies and research institutions (the latter being treated in the same way as companies – public institutions do not qualify for WBSO) pay less wage tax and lower national insurance contributions, and self-employed individuals can make use of a fixed deduction on income tax. Start-up entrepreneurs benefit from a supplementary credit. Specifically:

    • For companies, there are two brackets with differing tax reduction percentages. The first bracket gets to a certain ceiling and applies a higher reduction than the second (above the threshold). The aim is to encourage use by SMEs. For 2017, the tax credit (R&D payroll tax deduction) amounts to 32% of the first €350,000 of R&D wage and other costs (either the actual related costs and expenses or a fixed sum against costs and expenses); and to 16% of all further R&D costs.
    • To better target start-up firms, a ‘start-up facility’ was introduced. The tax deduction for the first €350,000 spent on R&D is higher for start-up companies (40%) as compared to other companies (32%).
    • Self-employed entrepreneurs are entitled to a fixed ‘R&D tax deduction’ of €12,484, and start-up self-employed entrepreneurs are entitled to an additional deduction of €6,245. Self-employed entrepreneurs who employ others are eligible for R&D deductions from the payroll taxes paid for these employees, as well as for their own R&D tax deductions.

    Since 2016 the WBSO has been integrated with the deduction for qualifying non-wage costs (Research and Development Allowance) (Schrievers and Emonts, 2016). As such, it is an ’above the line’ measure affecting costs rather than a measure affecting taxes on profits.

    Funding

    • National funds

    Involved actors

    National government
    Provided by the Ministry of Economic Affairs and Climate Policy (Ministerie van Economische Zaken en Klimaat); implemented by the Netherlands Enterprise Agency (NEA) (Rijksdienst voor Ondernemend)

    Effectiveness

    The reduced costs for employing R&D staff are intended to lead to a greater use of R&D employees and increased innovation. This should have other effects such as retaining knowledge in the enterprise to provide a basis to build on in the future or to carry out R&D that would not have been done without the measure. This would in turn increase the overall competitiveness of the enterprises and the economy by supporting the introduction of a flow of new products, IT services and processes. Such a context makes it easier to retain R&D employees, especially in smaller enterprises, which usually find it more difficult than larger enterprises to employ highly functionally specialised staff.

    The WBSO has been in operation since 1994. As such it has had an impact on innovation over a long period. Some 80-90% of the enterprises that do R&D in the Netherlands have used it. Its targeted uses and impacts have evolved according to the different phases of the economic cycle. For example, during the post-2008 downswing, the measure helped enterprises to retain R&D staff and capabilities that might otherwise have been made redundant.

    In the table below, the ‘awarded WBSOs’ refer to the value of WBSOs awarded, which can be higher than the total amount of budget spent (‘realised WBSOs’), because not all WBSO projects are carried out (’realised’), or maybe the whole 100% is not used. When more are realised than there is budget for in a year, the balance is deducted from the following year’s budget. It can also be observed that, during the years of the economic crisis, there were some substantial increases of R&D expenditure.

    Yearly approved and realised WBSOs (€ million)

    Year

    Awarded WBSOs

    Realised WBSOs

    Available budget

    Balance

    1998

    372

    287

    281

    -6

    1999

    353

    272

    293

    21

    2000

    365

    284

    302

    18

    2001

    435

    332

    337

    5

    2002

    464

    347

    367

    20

    2003

    425

    312

    336

    24

    2004

    466

    349

    367

    18

    2005

    475

    359

    392

    33

    2006

    506

    377

    417

    40

    2007

    501

    410

    417

    7

    2008

    554

    445

    417

    -28

    2009

    848

    701

    606

    -95

    2010

    1.037

    860

    692

    -168

    2011

    1085

    915

    870

    - 45

    2012

    853

    731

    864

    133

    2013

    893

    766

    735

    -31

    2014

    912

    781

    912

    131

    2015

    898

    771

    1040

    269

    2016*

    1469

    1200

    1206

    6

    *Includes RDA

    Source: Agentschap NL, Ministerie van Financiën

    An evaluation covering the measure's implementation over the period 2011-2017 is currently being undertaken. The last available evaludation (EIM, 2012), covering the period 2006-2010, shows that the measure does produce an increased expenditure on employment in R&D. Positive effects on employment consist of either existing staff working longer hours on R&D, or additional staff being recruited for R&D, or higher remuneration of R&D workers, or upgrading the functional/skill levels of R&D workers – or a mix of these.

    Impacts on innovation, enterprise performance and side effects were considered positive. A 1% increase in WBSO led to a 0.19-0.26% increase in the share of new products in turnover. In addition, there were unmeasured operational improvements as a result of process innovations. It was also found that use of the WBSO led to an increase in the nominal added value per worker: each 1% increase on WBSO led to a 0.13 -0.17% increase. 

    Further qualitative effects were identified: an increased appetite for higher risk projects, more R&D done internally rather than outsourced, better planning of R&D work, and an improved ability to apply knowledge from R&D and work with external parties.

    Strengths

    As the measure has been in operation for a long time, it is very widely known among the research community. It hardly requires any active marketing by the Netherlands Enterprise Agency (NEA, the implementing agency) other than by making information available on its website organising a few information sessions on WBSO every year. Most WBSO applicants use an intermediary. NEA organises an annual information session especially for intermediaries, who have done much to publicise the WBSO over the years. The fact that some 80-90% of organisations doing R&D in the Netherlands either are using or have used it, suggests that the largest share of such organisations are eligible, and restrictions are few.

    Weaknesses

    The evaluation evidence on the measure's implementation does not shed light on whether the measure has led enterprises/individuals not involved in any R&D to start doing so. The target market is the population of those who do carry out (or have already planned to carry out) R&D.

    Exemple

    No information available.
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