This chapter contains a description of tax provisions applied to agriculture in 2019, unless otherwise specified. They include taxes on income and profit, property, good and services, environmental taxes, and tax incentives for R&D and innovation.
Taxation in Agriculture
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Chapter 28. Netherlands
Abstract
28.1. Overview
In 2017, there were an estimated 55 000 farms in the Netherlands mostly owner-operated family businesses. Partnerships are also a common ownership structure in the agriculture sector especially when the ownership of the farm business is in the process of being transferred. Numbers of agro-food companies are small and these are primarily glasshouse operations.
While farmers benefit from some tax reduction arrangements, these are generally not restricted solely to agriculture. An example of special tax rules for famers is the Farm Land Appreciation Exemption (Landbouwvrijstelling) where capital gains on farmland are exempt from taxation under certain conditions. The horticulture sector benefits from a reduction of energy taxes for greenhouse operations and an exemption from real estate taxes. At the beginning of 2018, the VAT Agricultural Exemption was abolished and at the beginning of 2013, diesel tax rebates for the agriculture sector were removed.
28.2. Income taxation
The taxable income for all entrepreneurs in the Netherlands is reduced by an entrepreneurs’ allowance. Self-employed farmers can benefit from this tax concession. The allowance covers being self-employed, research and development, co-operation and a cessation of business allowance. Entrepreneurs can make use of a fiscal reserve to provide for their old-age pension.
All businesses, including those from the agriculture sector, can use the income averaging scheme. Under this mechanism a business calculates an average operating income based on its results over three years. The tax rate is then applied to the new amounts, which may lead to a tax refund. There is also the possibility to compensate for income losses three years backward and nine years forward. For incorporated businesses the compensation period is one year backward and six years forward.
Specific income tax rules that are applicable to the agricultural sector are:
Subsidy payments for specific woodland and nature programmes are tax exempt.
The Farm Land Appreciation Exemption (Landbouwvrijstelling) exempts capital gains on land from personal and corporate income taxation when the land is sold under certain conditions. However changes in value arising in the course of business (e.g. implementing irrigation schemes) are taxable. Non-agricultural changes in the value of land are also taxable (i.e. only changes to the value of the land under continued agricultural activities are tax exempt).
Incorporated small businesses are taxed at a preferential corporate tax rate of 19% up to a taxable profit of EUR 200 000 in 2019.
28.3. Property taxation
Municipalities charge an annual real estate tax (onroerende zaakbelasting) levied on owners of immovable property and on users of non-residential immovable property. The real estate tax is not deductible. To the benefit of the horticulture sector, greenhouses are exempted from the real estate tax.
Real estate transfer tax (conveyance tax) is levied on persons who acquire immovable properties in the Netherlands. The value of non-residential immovable property is taxable at 6%, while residential immovable property is taxed at 2%. To encourage business continuity the acquisition of land under commercial cultivation for agricultural or forestry purposes is exempt from the transfer tax.
Inheritance and gift tax levied on the beneficiary is based on a fair market value of all property received minus liabilities. Inheritance and gift taxes are determined by the value of the property and the relationship between the deceased/donor and the beneficiary. In 2019, in the case of a parent-child relationship, the tax rate charged was 10% for inheritances with a value of up to EUR 123 248 and 20% thereafter.
28.4. Tax on goods and services
As of 2019, there are two VAT rates for goods and services. The usual VAT rate is 21% but basic goods (including foodstuffs and flowers) are taxed at 9%.
Up until 1 January 2018, farmers made use of the VAT Agricultural Exemption (Landbouwregeling). Under this scheme farmers and other operators in the agriculture sector were exempt from charging VAT and could not claim back the VAT on costs they had incurred.
With the abolition of the VAT Agricultural Exemption (Landbouwregeling) at the beginning of 2018, farmers are subject to the usual VAT rules. The scheme was abolished because the rationale for maintaining it, i.e. administrative ease, is much less relevant nowadays with the possibility of online tax filing.
An energy tax applies to all users of energy (natural gas, other gases, electricity and certain mineral oils). The tax depends on the amount used and decreases with greater usage. There is a standard tax on energy (EB) and an additional charge for the Subsidy Scheme for Sustainable Energy (SDE +). This tax is also known as the Surcharge Sustainable Energy (ODE). Due to the degressive tax rate for both EB and ODE the energy tax charges are relatively low for large scale users (for example industry).
Agriculture and horticulture account for 7.6% of the national energy consumption in the Netherlands as a result of the prevalence of the glasshouse sector. Glasshouse horticulture operations have a small-scale company structure but in relative terms can be just as energy intensive as the large scale industrial users.
A reduced energy tax rate is applied to the first 1 million m3 of gas used for heating greenhouses each year, which results in a comparable energy tax rate pressure as for similar energy intensive industrial companies. In return the horticultural sector takes part in agreements and covenants with the government that contain reduction targets for CO2 emissions.
Energy-related greenhouse gas emissions of agriculture accounts for approximately 4% of total greenhouse gas emissions in the Netherlands. To meet the CO2 emissions target in 2020 the glasshouse horticulture sector must reduce its emissions by 32% in 2020 compared with 1990 levels. The sector will have to pay when exceeding the agreed CO2 emissions target. In laws and regulations a yearly decreasing CO2-target is secured for “the glasshouse horticulture CO2 sector system”. When the emissions of the sector in a particular year exceed the target, all companies pay proportional to their use of gas. With this levy allowances can be bought that cover the excess.
28.5. Environmental taxes
See section above for a description of the energy tax applying to all users of energy (natural gas, other gases, electricity and certain mineral oils).
28.6. Tax incentives for R&D and innovation
Fiscal incentives for private R&D include three main instruments, which are provided to SMEs, self-employed and multinationals in all sectors of the economy:
The R&D payroll tax allowance (WBSO) offers, since 1994, a contribution towards the wage costs of employees directly involved in R&D.1 This provision is not relevant for the primary agricultural sector, which does not have such employees.
The Innovation Box (Innovatiebox), introduced in 2010 as a successor of the previous “Octrooibox” operating since 2007, is directed towards lower taxes for benefits from WBSO projects and patents.
Tax incentives have been used in horticulture, but not so much by small food processing companies.
A specific tax deduction is given for environmentally friendly investments (MIA), investments in energy saving (EIA) and investments by small businesses (Kleinschaligheidsinvesteringsaftrek). Investments that are applicable for a tax deduction are for example electric vehicles, insulation, LED lighting and sustainable construction.
There is a special agriculture category for loans to entrepreneurs investing in specific environmentally friendly operating resources and projects such as organic farming (although this is not strictly a tax concession).
28.7. Other taxes
There are no other tax concessions for the agriculture sector.
Note
← 1. The WBSO is described on the website of the Netherlands Enterprise Agency as: ‘WBSO is an Act that provides a fiscal facility for companies, knowledge centres and self-employed persons who perform R&D work’. http://english.rvo.nl/subsidies-programmes/wbso-rd-tax-credit-and-rda-research-and-development-allowance.