On 1 July 2013, the Dutch Government re-opened the highly successful temporary accelerated depreciation tax facility that was first introduced in December 2008, to stimulate investments in the Netherlands. From 2009 through 2011, the regime allowed tax depreciation of 100 per cent of the economic useful life of qualifying new assets over a period as short as two years. Although the re-opened tax facility is generic in nature (i.e. applies to all assets, with some exclusions), the shipping sector, in particular, has benefited significantly from it. Reportedly, 80 vessels have been built while taking advantage of the regime that was in place during the period 2009 to 2011.
The reintroduced facility will be limited to 50 per cent tax depreciation and will (for now) be in place until the end of 2013. The asset must be acquired in 2013 (that is, the investment commitment must be entered into during 2013) and the asset must be operational before 1 January 2016. This period may be extended if the taxpayer can demonstrate that the delay in putting the vessel into use is caused by exceptional circumstances. No further details have been published on what would qualify as an exceptional circumstance, so this will be judged on a case-by-case basis.
Although the 2013 facility seems less beneficial than the previous stimulus of 100 per cent depreciation over two years, the new regime may still be attractive for investors. The Government has earmarked at least €400 million (i.e. taking into account a corporate tax rate of 25 per cent, this means approximately a €1.6 billion investment capacity) for the regime, but that amount is not capped, so if the facility is successful, the Government could allocate more.
Unlike the old facility, the reintroduced facility can be used only in a financial year which includes the period the facility has been made available to (i.e. 1 July 2013 until 31 December 2013). An important point to appreciate is that, so long as the asset has not been put to use, depreciation is limited to the investment amount actually paid for the asset during a financial year that includes the period 1 July 2013 to 31 December 2013.
Structures are available to ensure that, for tax purposes, the investment (and payment) is deemed to be made in 2013, so parties can optimise their tax benefit.
Application of the facility with respect to investments in seagoing vessels disallows application of the beneficial tonnage tax regime until 1 January 2023. It is not necessary for vessels (or other qualifying business assets) to sail under Dutch or EU flag, or to be located or used in the Netherlands, in order to benefit from the facility. Yet, in order to avoid abuse of the stimulus, assets have to be owned and used by a Dutch taxpayer, and the regime does not apply to assets chiefly used, directly or indirectly, by a third party (that is, no bareboating). Without this exclusion, for example non-taxable entities or foreign entrepreneurs would be able to indirectly – via reduced rental payments – benefit from the tax facility. Under certain conditions, time charters should be possible.
In the past, several investment structures using Dutch tax-transparent vehicles, such as general and limited partnerships, have been used to optimize tax efficient financing of new assets and to achieve attractive tax incentives for corporate tax investors with a Dutch tax base. The Dutch tax authorities are generally prepared to provide certainty for investors by way of advance tax rulings. Because of the small window of opportunity, investors interested in the new temporary accelerated depreciation facility are advised to act quickly.
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