In a letter On 28 May 2021, the State Secretary for Finance announced that the bill intended to regulate the BIK had been withdrawn.
The BIK will therefore definitely NOT be introduced.
The 2021 Tax Plan was approved by the House of Representatives on 12 November 2020. Part of this bill is the introduction of the Employment-related Investment Allowance (BIK), with a total budget of €4 billion(!).
Business owners may need to take the BIK into account as early as now. The tax relief can already be applied to investment commitments arising on or after 1 October 2020 are entered into.
Who is entitled to BIK?
The BIK is open to:
natural persons or legal entities;who are required to deduct payroll tax and;who are eligible for the small-scale investment allowance (i.e. entrepreneurs who pay income tax or corporation tax on their profits).
No staff = no BIK
The BIK is a reduction in payroll tax and social security contributions (contribution relief). This means that only business owners who pay staff in the Netherlands can make use of the BIK.
Furthermore, in order to fully implement the BIK, the business owner must pay sufficient payroll tax. This is because the BIK cannot result in a negative payroll tax liability.
This is assessed on a calendar-year basis. If, at the end of a year, it transpires that not all BIK has been implemented, payroll tax adjustment notices may be submitted for past tax return periods. On the basis of these correction notices, the payroll taxes paid for those periods will be refunded.
What investments
The BIK may be applied to investments in:
new (not previously used, assessed on the basis of the asset);business assets;with an investment amount per asset of at least € 1.500.
Furthermore, an application for BIK can only be made for a total investment of at least €20,000.
The thresholds of €1,500 and €20,000 are likely to mean that many small business owners will be unable to claim the BIK.
Which assets are excluded?
The BIK does not apply in respect of:
improvements to business assets;self-generated assets.
Furthermore, all exclusions that apply to investment allowances also apply to the BIK. The BIK therefore does not apply to:
business assets used (primarily) for forestry operations or a business to which a double taxation agreement applies;land (including the ground beneath buildings);houses and houseboats;passenger cars;vessels used for representative purposes;securities, receivables, goodwill, licences, exemptions, concessions and other dispensations under public law;animals;fixed assets intended primarily to be made available to third parties;business assets with an investment value of less than €1,500;commitments entered into between:people who belong to the same household;blood relatives or relatives by marriage in the direct line, or persons forming part of their household;persons entitled to an estate to which the business asset belongs;any person who holds at least a one-third interest in a company, and the company (and vice versa).
Terms
There are even more conditions!
The investment obligation must have been entered into:
after 30 September 2020 and;before 1 January 2023.
The final payment on the investment must have been made in the calendar years 2021 or 2022.
This means that, for any investment commitment entered into between 1 October and 31 December 2020, at least one payment must still be made in 2021.
Any investment commitment entered into by the end of 2022 must be paid in full by 31 December 2022 at the latest.
The investment must be put into use no later than 6 months after the final payment.
Due to these time limits, large-scale, multi-year investments generally fall outside the scope of the BIK. Where possible, these investments can be split into smaller, separate investments. This is also possible for investments made around the start and end of the scheme.
To make something plausible
It is, of course, important that the withholding agent can demonstrate that these deadlines have been met. There are no formal requirements regarding this burden of proof.
Record-keeping obligation
The applicant for a BIK certificate is obliged to keep records relating to the BIK in accordance with rules yet to be laid down.
Amount of the BIK
The BIK amounts to 3,9% of the investment amount. If the investment amount exceeds €5,000,000, the BIK on the excess is 1,8%. These percentages apply for the period from 1 October 2020 to 31 December 2021 inclusive. If the BIK budget is exceeded in 2021, lower percentages will be set for 2022.
Schematically:
KIA, MIA and EIA as well
The BIK is applied alongside the existing schemes for the small-scale investment allowance (KIA), the environmental investment allowance (MIA) and the energy investment allowance (EIA). Furthermore, the BIK does not preclude the application of the scheme for arbitrary depreciation on environmental investments (vamil).
For the purposes of depreciation on the asset and investment allowances, the cost of the asset is not reduced by the BIK.
Request
In order to implement the BIK, a BIK statement must be applied for. Applications can only be submitted electronically to the Netherlands Enterprise Agency (RVO). This can be done up to four times per calendar year
RVO will decide whether or not to issue the BIK certificate within 12 weeks of receiving the application.
Applications for BIK certificates can only be made from 1 September 2021. Entrepreneurs who invest in 2020 or early 2021 will therefore have to wait quite some time before they can benefit from the BIK scheme.
Hefty fine
Misuse of the BIK is punishable by an administrative fine of up to €100,000 or (whichever is higher) 20% of the amount of the tax relief.
A lower administrative fine (of up to €2,500) applies where the party responsible for withholding BIK:
knows, or ought reasonably to know, that incorrect information was provided in the application;has not notified RVO within three months that the asset was not put into use within six months of the final payment;has not notified RVO within one month that the obligation to withhold tax has ceased.
Partnership
In the case of a partnership (professional partnership, general partnership), the participants’ investments outside the partnership are attributed to the partnership for the purposes of the BIK.
Fiscal unit
The international aspects relating to the application of the BIK by a fiscal unity still require consultation with the European Commission (EC).
Pending this, the rules concerning the tax group described below will not come into force until approval has been received from the EC. We have therefore set out the description in italics.
Rejection by the EC could result in the tax consolidation scheme not being introduced at all. In that case, the BIK percentage will be increased so that the full budget can be spent.
Within a corporate tax group, one company must be designated as the BIK withholding agent for that tax group’s BIK investments. It is not possible to submit a BIK application for each individual entity within a tax group.
The BIK application covers the BIK investments of all constituent parts of the fiscal unity. The BIK application allows the desired allocation of the tax credit across the constituent parts of the fiscal unity to be specified.
The BIK statement then sets out the amount to be taken into account for each component. If no breakdown is specified in the application, the total BIK is allocated to the applicant (only this component may then claim the BIK).
In this way, entities within a fiscal unity that are not required to deduct tax are nevertheless subject to the BIK obligation. Furthermore, the BIK on investments made by an entity that pays little payroll tax can be applied to another entity within the fiscal unity.
Processing
The BIK must, of course, be included in the payroll tax return(s). In the 2021 calendar year, the section BIK tax relief not yet available. Therefore, the section reduction in social security contributions for the maritime sector are used.
The purpose of this note is to outline a scheme in broad terms. For the sake of clarity, matters have therefore been presented in a simplified manner. VWG is therefore not liable for the consequences of any actions taken or not taken as a result of this note