“Tax breaks green investments under fire” headlines the Financial Times on Monday, 9 February 2015. As the Government is doing a study on an adjusted tax system, it is obvious that these facilities are also under the microscope.
These are investments in (funds that invest in) wind farms, solar panel farms, manure processing plants, asbestos removal and the like. The return on these investments is often so low that they are of no interest to the investor without tax facilities.
The facilities consist of an exemption of the invested green assets in box 3 (the income from savings and investments) up to an amount of €56,928 (for tax partners: €113,856) and an additional tax credit of 0.7% of the exempted value of the green investments. Because of the exemption, the levy in Box 3, of 1.2% of the value of the investments is not due, so only the tax return on the investment is 1.9%. This is in addition to the real (often very limited) return generated by the investment.
The exemption in Box 3 means that these green investments also do not count towards schemes where an asset test based on the basis of Box 3 is applied. One such scheme is the rent allowance. If investing in green investments secures the rent allowance, the return on green investments is obviously even much higher than outlined above.