Introduction
In a bid to take substantial strides towards its climate goals, the Dutch government unveiled a series of legislative proposals and amendments concerning energy and environmental taxes on Budget Day.
These measures are geared towards reducing the Netherlands’ greenhouse gas emissions by a commendable 55% by 2030, in alignment with the government’s climate ambitions.
However, it’s essential to bear in mind that these proposals are subject to discussions, amendments, and adoption by the Dutch parliament.
This article provides an in-depth look at some of those proposals covering:
- Corporate Income Tax;
- Energy tax;
- Carbon tax;
- Coal tax; and
- Other proposals
Corporate Income Tax
From 1 January 2024, the energy investment deduction (EIA) rate will undergo a reduction, declining from 45.5% to 40%.
Additionally, the sunset clause for energy and environmental deductions has been extended until 2028, implying that they will remain in effect, at least until that time.
Energy Tax
Energy tax exemption for metallurgical and mineralogical activities
As of 1 January 2025, the energy tax exemption for electricity and gas used in metallurgical and mineralogical processes will be eliminated.
The Dutch government views these exemptions as fossil subsidies, which no longer align with the nation’s climate objectives.
New Specific Input Exemption for Hydrogen Production
In addition, a new energy tax exemption will be introduced on 1 January 2025, for the supply of electricity used in hydrogen production via electrolysis.
This exemption is confined to electricity utilized directly in the water-to-hydrogen conversion process, encompassing activities like demineralization, electrolysis, and the purification and compression of resulting hydrogen.
Exemptions Related to Electricity Production
Starting January 1, 2025, several changes are proposed regarding exemptions for electricity production, including cogeneration.
Key changes include:
- Limiting the output exemption for self-use of electricity produced by cogeneration installations to those with a maximum thermal capacity of 20 MW;
- Ceasing the input exemption for gas used in electricity generation, except for a predetermined quantity of natural gas per kWh of electricity generated;
- Broadening the input exemption for electricity used in electricity generation to encompass maintaining production capacity.
Phase-Out of Special Energy Tax Rate for Greenhouse Horticulture Sector
The reduced energy tax rate presently applicable to the greenhouse horticulture sector will be gradually phased out, commencing on 1 January 2025, and concluding in 2030.
Changes to Energy Tax Brackets
Effective from 1 January 2024, a new, lower bracket in the energy tax will be introduced for both electricity and gas.
This bracket will cover the first 2,900 kWh of electricity and 1,000 m3 of gas.
This adjustment is intended to provide the government with the flexibility to reduce energy tax for households when necessary, aligning with the current price cap for households.
Amendments to Rules for Block Heating
Various changes will be made to tax regulations for block heating, designed to accommodate the modifications in tax brackets mentioned above.
Carbon Tax
Increased Minimum Carbon Tax Price for Industrial and Electricity Generation Sector
Starting January 1, 2024, the Dutch minimum carbon tax prices for the industrial and electricity generation sectors will rise. Despite these increases, the government anticipates no budgetary implications, given the existing EU ETS price. The new minimum prices are as follows:
Introduction of a Carbon Tax for the Greenhouse Horticulture Sector
Commencing January 1, 2025, a carbon tax will be introduced for CO2 emissions in the greenhouse horticulture sector, mirroring the current system in place for the industrial sector.
This development coincides with the introduction of specific EU ETS obligations for the built environment.
Coal Tax
With effect from 1 January 2028, the coal tax exemptions for dual coal use and coal utilization for energy production will be discontinued.
The current coal tax rate stands at EUR 16.47 per metric ton.
Other proposals
New information obligations will be incorporated into specific energy tax regulations to align with the European Commission’s guidelines on State Aid for climate, environmental protection, and energy.
Commencing on 1 January 2024, these rules will encompass principles for providing data and information, upon request, to comply with EU obligations.
Conclusion
The Dutch government’s commitment to climate goals is evident in these proposed tax changes, which seek to incentivize eco-friendly practices while gradually phasing out less sustainable measures.
These proposals will be closely monitored as they make their way through the legislative process, potentially reshaping the landscape of energy and environmental taxation in the Netherlands.
If you have any queries about the Netherlands’ Green Budget, or Dutch tax in general, then please get in touch.