The WBSO (Research & Development tax credit) is a fiscal facility made available to all entrepreneurs residing in The Netherlands who (are about to) develop technologically new products, processes or software.
Earning a wage tax deduction of €16,000 a year (€23,000 for start-ups) for each full-time employee, it is the most important corporate tax credit for innovation in The Netherlands.
Dutch television show "Ondernemend Nederland" on how RenDit helps technology companies to benefit from the different tax facilities and grants.
In this episode: app developer Innovattic from YES! Delft
The WBSO promotes R&D activities aiming to help the company advance technically. The activities/projects should be new to the company applying for the fiscal facility; the innovation does not necessarily have to be unique nationally or globally. For this reason, the WBSO is the most widely used instrument to boost innovation in the Netherlands. In 2014 the available budget is €700 million, and in 2012 no less than 22,000 companies successfully used the fiscal facility.
The WBSO is open to a wide variety of project types. The key factor is technical innovation; not functional novelty. Grant applications emphasising functional innovation involving little or no technical innovation are generally declined.
A jacket launch or removal (steel structure supporting the top side) does not always go according to plan. An engineering company is therefore asked to design a predictive model. Extensive research is performed on possible unpredictable behaviour that can occur because the engineering company does not have any experience on this field. This analysis and the predictive model are both potentially eligible for the WBSO tax credit. The fact that this project is outsourced (subcontracted) by the offshore company to a engineering company is no impediment.
An engineering company is involved in the development of the foundation of windmills at sea. This type of foundation is technically different from earlier ones. Its development could be eligible for the WBSO. Regular engineering however would not qualify. As a result, only parts of this engineering company's subcontracted work could meet the WBSO conditions. The fact that the work is commissioned and paid for by another enterprise is irrelevant.
A software company is about to develop an application based on open data with which users can track airborne planes on their smartphones. Developing such an app could be eligible for the WBSO. The development being commissioned by a third party is, again, irrelevant.
A web design agency is developing a content management system, allowing customers to modify their websites easily. Because this system is built with proven technologies like PHP and HTML without any technical risks, this project does not meet the WBSO conditions, being classified and rejected as 'conventional engineering' instead of 'R&D work'.
A long-time manufacturer of wooden window frames decides, after a shift in demand, to produce plastic window frames instead. The hours spend by employees spend developing these new plastic frames, and the process to eventually produce the product, could all be eligible for the WBSO.
A company is producing a new chemical substance. Small-scale production is proven to be successful, but problems arise whenever production of the substance is tried at a larger scale. The company now wants to develop a new chemical process allowing the substance to be produced on a larger scale and at reduced cost. The hours its own personnel spends developing this process may very well be eligible for the WBSO.
A building contractor, an architect and a housing corporation decide to improve their collaboration and develop new internal procedures to do so. This project does not meet the WBSO conditions because it does not concern the engineering of a novel solution for a technical problem.
A WBSO application includes a description of the scheduled R&D project(s) and an estimated amount of hours dedicated to it. There are two different ways to submit a WBSO application: autonomous or through an intermediary, whom can be authorized to send in the request on behalf of your company.
The advantage of submitting an application autonomously is having matters in one's own hand. Having to keeping oneself informed on the ever-changing legislation on fiscal facilities and the strict application deadlines however is a disadvantage.
The majority of WBSO applicants use the expertise of consultants. An expert consultant almost always proves to be cost-effective, earning a company larger grants while taking less time acquiring them.
Unfortunately, many WBSO consultants promise the end of the rainbow and work for seemingly impossible low fees. Most of them, for example, take a cut of the initial amount of tax deduction a company might receive. This amount, however, can actually be smaller by the end of the year, which is the only point in time where the company will know for sure how large its tax benefit will be. Sadly, even the bigger firms exploit this knowledge deficit. A professional consultant will only take the actual WBSO benefits of a company into account when calculating variable succes fees, not projected benefits.
It is advisable to be assisted by a technically versed WBSO consultant, who properly understands the technical intricacies that play a role in the projects at hand. This is to prevent an applicant company from still having to write the WBSO application by itself, despite having paid for a WBSO consultant to do so. Furthermore, an engineer-consultant, better than anyone, knows which projects and activities meet the WBSO conditions, ensuring an optimal application.
A larger intermediary firm does not necessarily mean a better firm. Do you like to discuss internal projects and trade secrets with a new consultant each meeting, or would you rather prefer a small-scale firm with a more personal approach and a regular associate? A personally committed consultant is able to advise entrepreneurs effectively while remaining analytical and critical, safeguarding continuity and preserving a successful WBSO track record. For most SMEs a small-scale consultancy firm with expertise in specific fields and sectors has proven to be most effective and valuable.
Together with a WBSO application, one can also apply for the Research and Development Deduction (RDA). In short: the WBSO reduces the wage tax payable and the RDA lowers all other costs of innovation. In 2014, the RDA returns 15 per cent of those added costs.
If an innovative project, partially supported by the WBSO/RDA, returns a profit, the 'Innovation Box' can be applied. Corporate gains resulting from the innovative project (e.g. stemming from license revenues) are then not taxed at the regular 25% corporate tax rate, but at effectively 5% only.
Applying for the RDA is only possible when the WBSO is applied for. The 'Innovation Box' can only be used if a WBSO application is granted, or if a company has received a patent or obtained a plant breeders' right, PBR. An expert consultant will always keep the interdependence of these three fiscal instruments in mind, as it is the only way to fully benefit from them. The overall budget for the WBSO, RDA and 'Innovation Box' in 2014 is €1.6 billion.
Contact RenDit's consultants if you would like to receive more information on the WBSO, RDA and 'Innovation Box'. Or about other government grants for the IT, Offshore, Civil and Mechanical/Electrical engineering.
RenDit's engineer-consultants are experts in these fields and sectors and possess exclusive know-how because of their background in both engineering and at the government's WBSO desk. They effectively and successfully guide entrepreneurs through the maze of grants and fiscal facilities; their pragmatic and realistic approach will prove valuable to every company.
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