R&D activities differ from organization to organization. Although these activities are generally of high risk and uncertain amount of investment, they are crucial for the product development and expansion of market shares. The companies in the Netherlands have a chance to apply for subsidies and government grants to cover the R&D expenditures, however, these activities have to be qualified.
Generally, R&D activities that can qualify for the tax credit fall in one of these four categories:
1. New product development
2. New process development
3. Incremental product development
4. Incremental process development
Terms like “new” and “incremental” refer to the individual enterprise, but not to the whole industry.
Examples of qualified activities include:
- Design and development of new products/manufacturing process
- Product experimentation and modification
- Research of new applications for existing products;
- Testing for conformity with domestic/foreign regulation standards
- Improvement of a prototype of new products
- Work automatization
- Improvement of manufacturing/production technologies
- Software development
Activities are unlikely to be considered as R&D and therefore cannot be qualified for a tax credit if they relate to the general expenditures that a company would undertake without R&D.
- Testing or analysis of activities for quality control
- Routine data collection
- Testing and qualification of production lines;
- Production modifications without technical uncertainty
- Market research for advertising or promotions;
- Research that is funded by a third party
- Any other activities that do not fall into four mentioned categories
Certainly, rules and conditions for R&D regulations can differ depending on the country, region and industry, hence a company can require external help to make the right conclusions. You can get in touch with us or use the WBSO scan to be sure that your company and activities are eligible for a tax credit.