This article was last updated on 16 November 2020.
The government wants to encourage entrepreneurs to continue investing. On October 5, 2020, the Cabinet submitted the bill on the Job-related investment discount (in Dutch: Baangerelateerde investeringskorting, BIK). The BIK will be introduced on 1 January 2021, although it already applies to investments from 1 October 2020. With this investment discount, both private and corporate entrepreneurs can, under certain conditions, offset part of their investments against their payroll taxes. For investments up to and including five million euros, 3.9 percent of the investment can be deducted from the payroll taxes. For larger investments this is 1.8 percent for the part above five million euro. By linking the investment discount to the remittance of payroll taxes, companies that are currently making losses can already benefit from this scheme despite their loss-making position. This crisis measure will last until 31 December 2022. After that, the government will come up with another measure to reduce the employer's costs.
This bill was announced in the Offer Letter Package 2021 Tax Plan and will be included in the parliamentary debate. Below we will list the main points of this bill for you.
With the crisis measure BIK you can deduct 3.9 percent of the investment amount from your payroll taxes for investments up to and including five million euros, and 1.8 percent of the investment amount in excess of five million euros for larger investments. In order to make use of BIK, you must meet various conditions. An important condition is that you employ personnel for whom you pay wage tax, otherwise you cannot cash in the BIK.
The size of the investment discount depends on the size of your investments.
It was originally proposed that the discount would be three percent of the investment amount up to five million euros and 2.44 percent for the investment amount exceeding five million euros. These percentages have been adjusted in order to increase the benefit of the BIK for small and mid-sized enterprises (in Dutch: midden- en kleinbedrijf, MKB).
The government has made a budget available for this BIK of a total of four billion euros, to be spent in two years. As a result, the mentioned percentages can be adjusted as of 2022. At the end of 2021 it is estimated to what extent the budget of two billion euros for 2021 will be used. Depending on this, the percentages can be increased or decreased as of 2022, depending on the budget still available.
The investment discount is designed as a remittance discount for the payroll taxes. The remittance discount that is determined the BIK statement (see hereafter) can be applied to all payroll taxes to be paid (wage tax and national insurance contributions) for that calendar year.
A BIK application can be filled as of 1 September 2021. The RVO (in Dutch: Rijksdienst voor Ondernemend Nederland) must decide on the application within 12 weeks, so that the entrepreneur can cash in the investment discount for the first time later in 2021. If the entrepreneur is unable to cash in the entire BIK remittance discount in the remaining payroll tax returns for the year, he can still do so by correcting the payroll tax returns for earlier periods in the year.
Another advantage is that the BIK is a temporary addition to already existing more specific incentives such as the Small-scale investment allowance (KIA), the Energy investment allowance (EIA), the Environmental investment allowance (MIA) and the Random depreciation of environmental assets (VAMIL). This means that for smaller investments the KIA and the BIK can be combined and that companies can use both the BIK and the EIA, MIA or VAMIL for sustainable investments. These already existing investment facilities have a considerably smaller budget than the BIK.
New investments that you make from 1 October 2020 and in the years 2021 and 2022 are eligible for the BIK. They must be assets that have not been used before. You must have paid the assets in full between 1 January 2021 and 31 December 2022 and have put them into use within six months after that full payment. Investments made on or after 1 October 2020 and paid in full in 2020 are not covered by the BIK. Obligations relating to the improvement of a business asset and production costs relating to self developed or produced business assets do not qualify for the BIK. This is because the extent of such investments is less easy to check for the RVO, which implements the scheme together with the tax authorities.
Assets that are excluded from the small-scale investment allowance (KIA) do not qualify as a job-related investment for the BIK either. This means that, among other things, assets intended for rental are not eligible for the BIK. Land (including the subsoil of buildings), private houses and passenger cars that are not intended for professional road transport, are also examples of assets that are not eligible for the BIK.
Each application is subject to a lower limit of EUR 1,500 per asset and EUR 20,000 euros per application. A maximum of four applications per year is possible, but no more than one application per quarter of a calendar year.
The application must be submitted online within three calendar months after the end of the calendar year in which the last payment for the investment was made. The decision on the application will follow within twelve weeks after receipt of the application. You will then receive a BIK declaration. However, the application for a remittance discount on the basis of the BIK can only take place from 1 September 2021, because the RVO needs time to organise this new regulation.
In the case of several withholding agents within a fiscal unity for corporate income tax purposes, only the designated BIK withholding agent can submit an application. The latter allocates the amount of BIK remittance discount to be requested in the application to the withholding agents that are part of the fiscal unity. If this allocation is missing from the application, the total amount of BIK remittance discount will be allocated to the designated BIK withholding agent.
The BIK statement contains:
You must then keep records of the investments for which you have received a BIK declaration.
In certain cases, the employer has an obligation to report, and the RVO can issue a corrective BIK declaration to the employer. This is the case if:
incorrect or incomplete information or documents have been provided with an application that have led to an incorrect judgement (in this case a fine can also be imposed);
an asset has not been put into use within six months after full payment has been made.
If the compulsory administration concerning job-related investments is not in order, the RVO can also issue a correction BIK declaration for an investment for which it is insufficiently plausible that a job-related investment is involved.
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