The 2024 Tax Package from an ESG perspective

On 19 September 2023 on the occasion of Budget Day the Dutch government presented the 2024 Tax Package.

We already informed you about the main highlights of the proposed tax measures that are relevant for companies and entrepreneurs doing business in or with the Netherlands. Please find below the main highlights of the proposed tax measures from an ESG (environmental, social & governance) perspective.

Business incentives
The small-scale investment incentive provides for tax deductions for corporate income tax and personal income tax purposes in connection with the acquisition of one or more new qualifying business assets. Due to positive outcomes from evaluation of the Energy Investment Deduction (EIA), the legislator proposes to extend the application of the EIA including the Arbitrary depreciation of environmental investments (VAMIL) and the Environmental Investment Deduction (MIA) to 1 January 2029. The legislative proposal also proposes to reduce the percentage of deduction of the EIA from 45.5% to 40%.

Energy tax adjustments
The Dutch government proposes to split the first gas and electricity tranches in the energy tax and set the tranche limit at 1,000 m³.

Further legislative changes are necessary to allow future reductions in the rate of the new first gas bracket compared to the rate of the new second gas bracket. One important change is the introduction of a flat-rate refund scheme for block heating. This ensures that consumers behind a block heating do not pay more energy tax for consumption in the new first bracket than consumers with an individual connection.

Finally, there is a proposal to update the list of renewable heat sources in the city heating scheme of the energy tax. This includes the addition of installations which predominantly use aquathermy, air-water heat pumps, biomass or electric boilers. This eliminates the difference in tax treatment of similar heat sources. By doing so, the choice of these sustainable techniques will not be driven by taxation, but by which technique is best suited to the situation. This will improve the effectiveness and efficiency of the scheme.

Note! According to the Dutch tax authorities, implementation of the measure is not feasible until January 1, 2025.

The energy tax has reduced rates on natural gas for the greenhouse sector. These reduced rates will be phased out between 2025 and 2030.

The energy tax has an input exemption for the use of natural gas and electricity to generate electricity. This exemption will be reduced. The output exemption for electricity is partially abolished. Operators of medium-sized plants will be treated differently so that they will not be subject to compulsory taxation. All changes will take effect by 2025.

As of 1 January 2025, certain energy tax exemptions will expire, i.e. for metallurgical and mineralogical processes. This proposal will eliminate a benefit on fossil energy use as of 1 January 2025 for the iron and steel industry, non-ferrous metal industry (including aluminum and zinc production), metal products industry and mineralogical industry (including glass, tile, brick and limestone). The exemption is retained for hydrogen production by electrolysis.

Greenhouse horticulture: introduction CO2 levy
A CO2 tax will be introduced for greenhouse horticulture companies as of 1 January 2025. The amount of CO2 emissions will be determined based on the number of cubic meters of natural gas burned and a standard CO2 emission factor set annually by the Minister of Economic Affairs and Climate. The rate will increase from EUR 1.35 per ton of CO2 in 2025 to EUR 6.80 per ton of CO2 by 2030.

Coal tax adjustment
Companies that import, transport or store coal must pay coal taxes. The government proposes to abolish exemptions for dual use of coal and non-energy use of coal by 2028. This will put an additional price on CO2 emissions and emissions of other air pollutants from coal use.

Minimum price CO2 emissions
The minimum price for CO2 emissions for the electricity sector and industry will be increased. The aim is to encourage Dutch companies to consider the climate impact of greenhouse gas emissions in their investment choices.

If you have any questions regarding the above, please do not hesitate to contact us.