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BIK scheme to be retroactively revoked

Late May 2021, the Dutch cabinet announced that BIK (Job-Related Investment Tax Credit) is to be revoked with retroactive effect to 1 January 2021.
This tax relief measure, introduced on 1 January this year for entrepreneurs who made investments in new operating assets, provided a temporary tax credit that could be offset against payroll taxes, social security contributions and final levies. BIK is being revoked because it may be seen by the European Commission as unlawful state aid. While the cabinet believes this is not the case, it has investigated a number of options. These investigations show that it is not possible at this point to eliminate uncertainty for entrepreneurs. The EC could later rule that these entrepreneurs are not eligible for the tax credit and must eventually repay the money with interest. 

Lower unemployment contributions

Nevertheless, the cabinet remains intent on pulling the economy out of the Covid-19 slump as quickly as possible and encouraging investment. It has therefore chosen to lower employers’ contributions to the unemployment fund (AWf) as from 1 August 2021. 

When the Dutch cabinet approves the current proposel, the AWf premiums will be determined as follows:

  • The low premium on the wages of employees with a permanent contract will be reduced from 2.7% to 0.34%.
  • The premium percentage on the wages of other employees will be reduced from 7.7% to 5.34%.

This means that the legally established difference of 5% points between the two percentages is maintained. 

Private sector employers pay contributions into this fund to finance unemployment benefits for employees who lose their jobs. The reduction of AWf contributions lowers wage costs and gives entrepreneurs more scope to invest and obtain external financing for such investments if needed. 

Late last year, the cabinet submitted its BIK plan to the European Commission for approval, in order to obtain certainty that the tax credit was indeed authorised state aid. Without such EC approval, some investments in another EU member state might also qualify for BIK, and this was something the cabinet wished to prevent.

Because revoking BIK requires an amendment of the law, the cabinet has submitted a legislative proposal to the Dutch Council of State, after which it will be put before Dutch Parliament as soon as possible.