On 19 September 2023, the Dutch government published the 2024 Budget Plan, as well as changes to tax legislation. In this Indirect Tax alert, we will summarize the latest proposals and legislative changes that will come into effect in the near future and which are relevant for the Indirect Tax practice.
The Dutch government has fallen during the summer and is now functioning as a caretaker government. Even though a caretaker government usually submits fewer legislative proposals because proposals on controversial topics cannot be submitted by a caretaker government. Nearly all tax measures concerning indirect taxes were considered non-controversial.
As of January 1, 2025, the 9% rate on certain agricultural input goods and services (such as legumes and grains not intended for human consumption, seed potatoes, livestock, beet roots, agricultural and horticultural seeds, round wood, straw, animal feed, flax and wool rough and unwashed) will be abolished. This is related to the agricultural scheme that has been abolished as of January 1, 2018 and that agricultural entrepreneurs are no longer exempt from VAT. There is therefore no longer a need for the reduced VAT rate to apply to these agricultural goods. Due to the fact that agricultural entrepreneurs were not entitled to deduct input tax, a reduced VAT rate on the goods they purchased for their production resulted in a relatively lower input tax.
This, for example, puts an end to the distinction whereby food for guinea pigs is taxed differently than food for rabbits (guinea pig food was taxed at 21% and rabbit food at 9% because rabbits themselves are also considered as food).
Also as of January 1, 2025, the application of the reduced rate for the rearing of animals and the cultivation of plants will be abolished by means of a memorandum of amendment to the Fiscal Collection Act 2024 bill (“Fiscale verzamelwet 2024”).
Currently, newly built real estate can be acquired without VAT or real estate transfer tax (RETT), by acquiring all the shares in the relevant real estate company, as the transfer of such shares is out of scope of VAT and exempt from RETT. A direct transfer of newly built real estate is taxed with VAT and benefits from the RETT concurrence exemption.
The Dutch government considers the difference in taxation between asset deals and share deals a disturbance of the level playing field and intends to resolve it by levying RETT on certain share deals.
To this end, the government proposes to abolish the RETT exemption for share deals of real estate companies owning building land and newly built real estate that is (partly) used for VAT exempt purposes.
The RETT exemption will not be abolished for acquisitions of shares in companies owning new real estate that is used for activities allowing at least 90% VAT recovery in the two years following the acquisition. Reasoning behind this exception is that the RETT proposal is aimed at countering VAT saving structures, and such VAT savings are not considered a motive for a share deal in case of at least 90% VAT recovery for the real estate asset. Consequently, share deals with newly built logistical, office and retail real estate should in most cases still qualify for the RETT exemption, as these types of assets are often rented out VAT taxed for at least 90%.
To prevent overkill with this proposal, a new RETT rate of 4% will be introduced which will apply to acquisitions of shares in companies with building land and new real estate for which the VAT recovery right is less than 90%. During the construction of this new real estate at least part of the VAT on construction costs is not recoverable, justifying a lower RETT rate than the general rate of 10.4%.
The measure should enter into force as from 1 January 2025. A transitional regime will apply for certain ongoing development projects. This measure was already announced earlier and has now been included in the 2024 Budget Plan.
Other Indirect Taxes
As of January 1, 2025, the energy tax exemption for metallurgical and mineralogical processes will expire, the input and output exemption in greenhouse horticulture will be adjusted and the tax investment facilities ‘EIA’ (energy investment deduction), ‘MIA’ (environmental investment deduction) and ‘Vamil’ (arbitrary depreciation of environmental assets) will be extended until 2029.
The excise duty rates for alcoholic beverages are increased based on the table correction factor for inflation. The excise duty on diesel fuel oil will also be increased to limit its use and create a level playing field. Furthermore, tobacco taxes will be increased.
This alert is for general information only and is not tax advice. For further information regarding this alert, please contact one of our Indirect Tax specialists.
Rendall Hofman, Partner – [email protected]
Bilge Kucukali, Tax lawyer – [email protected]