The Netherlands might not be the first place you think of when you are planning a new office for your technology startup. As the startup investment climate, networks and labour markets are not yet mature. But to all tech startups I have one thing to say: if you want to save some serious money, get your product developers to the Netherlands.
A common strategy for ambitious Dutch founders is to seek opportunities to pace things up elsewhere. They move their entire company abroad, for instance to Berlin, NYC or the Bay area.
This is not a smart thing to do if you have not thought this trough. It will cost you serious money, as you are missing out on some major company and wage tax cuts. Besides, the quality of living in The Netherlands is among the highest in the world and life in general is affordable.
Obviously it is a good idea to have a presence in one of the more developed start up hubs. You should have that, since if you’re a global player and want to expand your relevant network and customer base. You will need both locations in your strategy.
But there are two main branches of benefits in having your office in Holland that I want to point out: the innovation tax cuts and the expat tax arrangement.
Innovation tax cuts
The Netherlands has a very attractive tax regime for innovation. It’s the undisputed number one if it comes to treating innovative companies with the regards they deserve. The main elements are the WBSO, RDA and Innovation Box.
The WBSO is a program that aims to cut the labor cost for R&D activities. It’s a direct discount on wage taxes. For a startup without a track record in this program, discounts can be as much as 14,50 euro per hour. Later benefits will be based on the actual wages of your product developers. Your burn rate burns less now. And hiring that rock star developer becomes a lot cheaper.
The RDA is another program that leads to a deduction in the company tax. It’s a great opportunity for the IoT and maker-companies that love to prototype. It’s based on actual investment and costs regarding your product development. It can only be obtained for projects that qualify for the WBSO. When the granted “WBSO R&D hours” are above 150 hours per month, the deduction is 60 percent of your actual investment and costs.
The godfather of the innovation tax cuts is the “Innovation Box”. It’s plain and simple to explain, but a little bit harder to set up correctly for a layman. In short, profits on products or services that were developed under the WBSO qualification are taxed against a rate of 5 percent instead of 25 percent company tax.
I guess you didn’t see that coming. Without sending your money trough the Bahama’s or some other crazy structure, you keep your hard earned cash in your pockets.
However, there might be a bump in the road later this year. The big economies in the European Union (EU) do not fancy this innovation “subsidy”. It’s widely used by multinationals such as ASML and Philips.
The Dutch recently gained influence in the EU and we’re a trustworthy partner to the EU project. I personally don’t expect an end to this opportunity. Worst case scenario we have to deal with some added conditions. We’ll see in September how the negotiations with other member-states work out.
30 percent arrangement for non-Dutch employees
When you fly in all your talent to the Netherlands, we welcome them with a major wage tax cut. This is a great way to lower your wage costs and cover relocating costs.
Conditions to qualify
It’s quite simple. If your employees are on the payroll, they have a gross salary that is equal to or higher than (2015) 36.705,— euro, and you’ve made a formal request to the Dutch tax authority you’re good to go.
30 percent tax free
To cover “expenses of relocating” the employer may provide a tax free payment of 30 percent of the gross wage mentioned before or actual expenses if higher. The fun part is that you don’t have to provide evidence if you take the 30 percent-option (instead of actual expenses) and this benefit will last for eight years.
The Netherlands provides a range of tax opportunities for tech startups. I find that they are not recognized often enough. Next to that it is an awesome country to work and live. Startups should consider the benefit of (re)locating their product development to the Netherlands.
Do the math. Come to the Netherlands and build great stuff for less.
You can find more information on the Dutch tax system on the government website (in Dutch), also feel free to ask or comment via the reply button below.
Rob Kramer builds BM’s for Accounting & Business Consulting that are focused at serving #Tech #Startups and its stakeholders. With JUNTZ he serves fast growing companies to get the most out of their financial management. He currently works on bringing more product development companies to the Netherlands by helping them effectively use the Dutch innovation (tax) policies. In his spare time he is a proud father, trows an odd shaped ball backward and rocks the MiniBrute. @robkramer_NL & www.juntz.com
Photo by Pieter van Marion (creative commons via Flickr)