2021 Tax Plan – Outline of car taxes and environmental taxes measures

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2021 Tax Plan – Outline of car taxes and environmental taxes measures  

2021 Tax Plan - Budget Day (Prinsjesdag)

The following lists the measures proposed in the 2021 Tax Plan in respect of car taxes and environmental taxes.

18 November 2020

Outline of car taxes and environmental taxes measures

Dutch version

Back to outline 2021 Tax Plan

Industrial CO2 tax

The Industrial CO2 Tax Act provides for a tax on the emission of greenhouse gasses (“CO2”) during and before industrial production and waste incineration. The tax aims to ensure a CO2 reduction in industry in line with the current industry target in the Climate Agreement and at the same time to keep the Netherlands attractive for new and existing sustainable activities.

The tax is closely linked to the European Emissions Trading System (EU ETS). A stricter EU ETS will automatically trigger a less strict national tax. The tax has been designed such that it does the least possible harm to the competitive position of Dutch companies and the Netherlands as a business location. It also factors in how the corona crisis affects the industry.

Operation of the Industrial CO2 Tax
The CO2 tax has been designed as a tax with a decreasing exempted base. The emissions are partly tax-exempt (to this end, the bill provides for dispensation rights). Only those emissions will be taxed that must be reduced in view of the industrial reduction target of the Climate Agreement and subsequent recalibrations. Exempted emissions will be reduced linearly until into the year 2030. Only the part corresponding to the reduction target will be tax-exempt.

Taxpayers
The tax is levied primarily on plants covered by the EU ETS. Since the tax basically focuses on emissions associated with industrial production, plants operated exclusively for greenhouse horticulture, district heating, electricity generation, or the heating and cooling of buildings and not for manufacturing products are excluded from the scope of the tax. It means that on balance 271 EU ETS plants are expected to be liable for the tax. The tax will likewise be levied on waste incineration plants and plants whose nitrous oxide emissions are substantial.

Tax rate
The CO2 tax rate will be EUR 30 per tonne of carbon dioxide equivalent from 1 January 2021. This rate will increase linearly by EUR 10.56 a year until 2030, so it will be EUR 125 per tonne of CO2 in 2030. The self-assessment payment is not based on this CO2 rate, though. Instead, it is based on the rate applicable in that year minus the EU ETS price of the same year. So, if the EU ETS price is higher than the CO2 rate in the related year, a nil tax return is sufficient.

Surcharge for Sustainable Energy

The Surcharge for Sustainable Energy (Opslag Duurzame Engergie, or “ODE”) is a tax on the consumption of electricity and natural gas, according to the same legal methodology as the energy tax. One of the purposes of the tax is to finance the expenditures related to the subsidy under the Renewable Energy Production Incentive Scheme (Stimulering Duurzame Energieproductie, or “SDE++”).

The government proposes to increase the ODE rates across the board by 10% in 2021 and a smaller increase for 2022 to cover the increasing expenditure on subsidies (SDE++) and to finance the energy and climate transition.

Replacement of Rose of Postal Codes Scheme by a subsidy scheme

The Reduced Energy Tax Rate Scheme, more commonly known as the Rose of Postal Codes Scheme, will be replaced by a subsidy scheme. As of 1 April 2021, cooperative associations and owners’ associations will be able to apply for a subsidy for a solar energy project or a small-scale wind energy project. Like in the current scheme, the postal code area will be used to ensure the local character. The subsidy will be paid to a cooperative association or owners’ association. The project participants must be members of this cooperative association or owners’ association and, at the start, live in the same postal code area as where the electricity connection to the production plant is located. The Rose of Postal Codes Scheme will expire on 1 April 2021. However, a 15-year transitional period is provided for members of cooperative associations who already have a designation and for members who have applied for a designation before 1 April 2021 and which the inspector will decide on after that date.


Related article - House of Representatives has adopted the Tax Plan 2021

Taxes on cars and motorcycles

As of 1 January 2022 the taxable event for the levy of private motor vehicle and motorcycle tax (“BPM”) will be shifted from the moment when in the vehicle registration register an owner’s name is linked to a car, to the earlier moment when in the vehicle registration register a registration number is allocated to a car. In connection with this, the applicant for registration will be regarded as a taxpayer. Another proposal is to align the rate of depreciation of used cars with the moment when the identity of the vehicle is examined as part of the application for registration in the vehicle registration register. These amendments are proposed because of the time that sometimes expires between the moment when an owner’s name is linked to a car and the moment when a registration number is allocated to a car. This has led to complications, as the fee must be paid before a registration number is allocated to a car, while at the same time the condition of the vehicle at the moment when an owner’s name is linked to a car was decisive for the levy. These amendments improve the BPM in two ways: equal tax treatment of domestic and import trade, fewer notices of objection, better supervision, and a less complex system.

Tightening the CO2 bracket limits and bracket rates in the BPM

Research by the Netherlands Organization for Applied Scientific Research, TNO, has shown that technological developments will result in conventional cars emitting less CO2. In order to reflect these developments in the BPM, the CO2 bracket limits will be lowered by 4.2%. The rates - tax amounts per gram/kg CO2 emission with the exception of the fixed base - will first be indexed and then increased by 4.38%. The CO2 limit for the diesel surcharge will be tightened to 77 grams in 2021, down from 80 grams per kilometre in 2020. The diesel surcharge will be increased to EUR 83.59, up from EUR 78.82.

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