A new legislative proposal was recently announced with the aim of imposing a temporary solidarity charge on companies that (in short) are active in the oil and gas industry. The proposal follows from Council Regulation (EU) 2022/1854 on an emergency intervention to address high energy prices. The aim of the proposal is to tax an amount of ‘surplus profits’ that were not foreseen and are a result of unforeseen circumstances, such as the war against Ukraine and the current inflation.
The intention is to introduce the new levy with retroactive effect for financial years that started in 2022. The Dutch government will use the proceeds of the charge to support households. For the years 2023 and 2024, the intention is to increase the rates of the Mining Act (Mijnbouwwet). The solidarity charge will be included in a separate tax act. The main characterises of the charge are as follows.
The solidarity charge will be levied from Dutch resident or foreign Dutch corporate income tax (“DCIT”) payers that generate at least 75% of their turnover through economic activities in the area of the exploration of hydrocarbons, mining and refining of crude oil, among others, as referred to in Regulation (EC) No 1893/2006 of the European Parliament and of the Council. The solidarity charge will be levied on a stand-alone company basis, i.e. as if there were no DCIT fiscal unity.
The solidarity charge will be levied over ‘surplus profits’, i.e. amounts exceeding 120% of the average taxable income of a taxpayer concerning the four years preceding the financial year that started in 2022 (with a minimum of zero). The rate of the solidarity charge will be 33 percent. For purposes of the solidarity charge, tax payers will need to file a separate tax return (besides the DCIT return that needs to be filed for each financial year), which must be done within 17 months after the end of the financial year.
To mitigate the risk that the solidarity charge cannot be collected, measures have also been proposed to amend the Dutch Collection of State Taxes Act (Invorderingswet 1990). One of those measures is the introduction of joint and several liability regarding the solidarity charge for companies that are included in the same DCIT fiscal unity to which the tax payer also belongs (even if these companies themselves are not subject to the temporarily solidarity charge).
The Dutch government believes that introducing the solidarity charge with retroactive effect is not in breach of Article 1 of the First Protocol of the European Convention on Human Rights. Their reasoning is that the effects for which the temporary solidarity charge will be introduced (i.e. the large loss of purchasing power of households in the Netherlands due to the skyrocketing energy prices as a result of the Russian war in Ukraine) occurred in 2022 already. Based on a balancing of interests, the government believes that specific and compelling reasons necessitate the proposed temporary solidarity charge and that there is a fair balance between the breach of legitimate expectation and thus the interests of the taxpayer on the one hand and the public interest on the other hand.