Energy investment allowance in 2023 (EIA): here's what you need to know

Introduction

In the Netherlands, we have three types of investment deduction. In this article we focus on the energy investment deduction. We explain what it is, when you may apply it and the amounts involved.

What is the energy investment deduction?

The energy investment deduction (EIA) is one of three forms of investment deduction. The EIA is a scheme that offers financial benefits when you as an entrepreneur invest in energy-saving business assets and renewable energy. The depreciation of this investment may be deducted from profits. You may also deduct an additional amount from the profit. This amount is 45.5% of the investment amount.

Conditions of energy investment deduction

However, there are some conditions you must meet in order to take advantage of the energy investment deduction:

• The investment per asset must be at least 2,500 euros
• You must not have used the asset before
• The company means must be found in the energy list of the RVO.
  • Exception: business assets that are not on the energy list, but do save fossil or energy fuels and meet a general savings standard are also eligible for the EIA
  • Exception: if you request energy advice, the costs also fall under the EIA under certain conditions
• It is not possible to get the EIA and MIA at the same time
• However, it is possible to combine the EIA with the KIA

Read more about investment deduction, and the other two forms small business deduction and environmental investment deduction and vamil.

Example energy investment deduction

The company's taxable profit is 300,000 euros. Normally, the entrepreneur will pay 19% corporate tax on 200,000 euros, and 25.8% on the remaining 100,000 euros.

This would mean it would pay a total of (200,000 * 0.19) + (100,000 * 0.258) = 63,800 euros in taxes.

Now the company is making an investment that is in the energy list. This investment amounts to 200,000 euros.

The EIA in that case is 200,000 * 0.455 = 91,000 euros. This amount may be reduced on the taxable profit: 300,000 - 91,000 = 209,000 euros.

If we now calculate how much tax the entrepreneur must pay, we arrive at the following: (200,000 * 0.19) + (9,000 * 0.258) = 40,322 euros.

So the tax benefit the entrepreneur has thanks to the EIA scheme is 63,800 - 40,322 = 23,478 euros.

Read more about investment deduction, and the other two forms small business deduction and environmental investment deduction and vamil.