1. Tax on IP ownership
Royalties and capital gains are generally subject to corporate income taxation at the statutory rate (25.5% on profits exceeding €200,000).
The Dutch government stimulates innovation and research and development activities through corporate income tax incentives in the Dutch Patent and Research & Development Box (Patent Box). In the Patent Box, all profits are allocable to self-developed intangible assets that are patented or qualifying research & development activities are subject to a special tax regime at a rate of 10%. The profits covered include royalty income and capital gains upon (partial) disposal of the assets minus depreciation costs. Trade marks and similar assets do not fall within the scope of this special tax regime.
2. Withholding taxes
There is no withholding tax on royalty payments. The Netherlands has a wide tax treaty network providing for beneficial reduction of double taxation and, in particular, reduction of withholding taxes on royalty payments received by a Dutch entity. Additionally, for royalties received from EU affiliates, protection can be obtained under the EC Interest and Royalty Directive.
3. CFC rules
The Netherlands does not have specific CFC rules. Under certain circumstances, a Dutch corporate taxpayer will have to report its participation in a non-Dutch resident company at fair market value and include any gain or loss from such valuation in its taxable income. Typically, this applies to a participation of at least 25% in the capital of a non-resident company of which the aggregated assets consist of 90% or more of free portfolio investments inclusive of IP assets used for group licensing activities, if and to the extent that the participation is not subject to an effective profit tax rate of at least 10% over a taxable base according to Dutch tax standards. It is noted that although the benefits derived from such non-resident participation are not eligible for a tax exemption, a tax credit will nevertheless apply to avoid double taxation unless the participation is not effectively subject to tax at all. For EU shareholdings it is optional to credit the actual underlying tax.