Netherlands

Netherlands

Wind beats the tax man--it's a business not an asset

A long running dispute over the taxable status of income invested in wind plant in the Netherlands looks to have finally been resolved in favour of the investor. In a ruling on a test case, the Tax Division of the High Court in Amsterdam says income from wind turbine operation is not subject to high marginal tax rates. The revenue service had claimed that because the labour costs of wind energy production are negligible, wind energy profits should be regarded as income from assets rather than earnings from business operations, and accordingly be taxed at the full rate. This claim was challenged by accountants Westelijke Accountantskantoren, which brought the test case to court. Although a similar test case still awaits a ruling from a court in Leeuwarden, the Amsterdam verdict will be nationally binding. Private wind farm developers can now offset their entire investment against income tax. Moreover they will be eligible for an Energy Investment Allowance (EIA) of 40% of their original capital investment. That means that a developer investing, say, NLG one million in new wind plant can earn NLG 1.4 million from the investment before becoming liable to income tax. The ruling should have a positive effect on the market. Since the end of direct subsidies for wind plant in 1995, the government's attempts to stimulate private investment through tax breaks had been thwarted by the Dutch revenue service's refusal to play ball

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