Tax benefits for environmental investments sharply reduced

January 4, 2024

The demissionary cabinet has made cuts to the list of environmentally friendly business assets eligible for tax benefits upon purchase. As of January 1, electric taxis, hydrogen-powered tools, and low-emission floors in dairy farming no longer qualify. The fiscal advantage for using biomass as a raw material has also been terminated.

The Netherlands Enterprise Agency (RVO) has announced which expenses for innovative business assets remain eligible for the Environmental Investment Allowance (MIA) and the Random Depreciation for Environmental Investments (Vamil). The 2024 Environmental List is significantly shorter than the previous year's, with 108 business assets removed and only six new additions. Conditions for 112 devices, building materials, transportation means, and production methods have been modified to qualify for fiscal subsidies.

Waste or byproduct

With the MIA, entrepreneurs and companies can deduct up to 45% of their investment from taxable profits. The Vamil allows them to depreciate 75% of the investment costs whenever it suits them. According to the RVO, the total tax benefit from both schemes can amount to over 14% of the investment. This year, €217 million is allocated for these schemes, often mentioned together.

The significant reduction in eligible business assets is a result of changes in European rules for state aid and the outcome of the evaluation of tax subsidies. Under the new European rules, government support is prohibited for the replacement of primary raw materials, such as oil and rock, with biomass-based raw materials, unless this biomass is waste or a byproduct.

Built environment

According to Europe, hydrogen only qualifies for support if it is produced with sustainably generated electricity. Due to the difficulty of verifying whether hydrogen is 'green' or 'grey' (produced with electricity from fossil fuels), investments using this energy carrier have been removed from the Environmental List. 'Grey' refers to hydrogen produced with electricity from fossil fuels. However, the revised state aid rules have particularly removed a large number of business assets from the list in the built environment category.

Emission reduction

Cleaning up the list was also a recommendation stemming from an evaluation of the MIA/Vamil for the period 2017-2021. Business assets that have become common and whose purchase prices no longer pose an obstacle to investments should be removed more quickly. This limits the number of free-riders, according to the evaluation, meaning the entrepreneurs who would have invested at that time or later even without the fiscal stimulus.

Emission-reducing floors in dairy barns have been removed because, compared to traditional slatted floors, they provide insufficient emission reduction, according to the RVO. Tax benefits for low-emission systems in pig and poultry farming remain available. New for agriculture are mechanical pest control equipment for crops in agriculture and horticulture and equipment for reducing ammonia and methane emissions during manure spreading.

Also new is a tap system for water and soft drinks, intended to reduce the use of disposable packaging, such as bottles and cartons.