The number of projects in energy transition should be scaled up to achieve the Dutch climate objectives. Energie-Nederland will discuss two tax schemes.
1. The 20% interest deduction restriction
Corporate income tax includes a generic interest deduction restriction since January 1 2019. The scheme was originally set at 30% of adjusted taxable income (EBITDA). On January 1 2022, this was lowered to 20%. This means the Netherlands has a stricter restriction on interest deduction than its surrounding countries. The Netherlands maintains a 20% EBITDA rule while most countries around us use 30% EBITDA.
Interest has risen sharply in recent years. In addition, investment costs have increased due to higher prices for raw materials and labor. With its 20% interest deduction restriction, the Netherlands is at a substantial disadvantage with regard to the profitability of investments compared to surrounding countries. Because of this restriction, Energie-Nederland has noticed that investors and developers of new energy projects more often prefer similar projects in surrounding countries. This is to do with additional opportunities for tax deductions.
To achieve the energy transition in the Netherlands, the interest deduction restriction should at least be brought into line with surrounding countries. Included in this should be a consideration of an exemption for interest deductions for infrastructural projects, including energy.
2. The crisis measure for discretionary depreciation
At the end of 2022, the Ministry of Finance introduced a crisis measure to encourage investments in 2023. This measure was announced and implemented rather late. The measure only applies to investments made in 2023. The crisis measure means that a discretionary depreciation of 50% of the investment amount may be taken on investments. Provided the investment is implemented before 2026.
Energy projects are often characterized by long lead times. Several years may pass between the start of a project, the investment decision, and the implementation of the investment. Because of the 12-month time restraint of the crisis measure, it has little or no effect on incentivizing new projects in the energy transition. The effect of this measure is that existing and planned projects will receive a tax windfall in 2023.
Energie-Nederland believes that this instrument could make a substantial contribution to the energy transition. Then, firstly, this measure should have been announced in a timely manner, secondly, run for a longer term, and thirdly, the implementation period of the investment should be extended by at least 1 year. As such, Energie-Nederland calls for this measure to be extended until, for example, 2027. In addition, it should be announced in a timely manner, so that it encourages new investments and brings the climate goals closer. In this, Energie-Nederland also offers the consideration that this measure should only be introduced for infrastructural and energy-related projects.