Withdrawal of the job-related investment discount (BIK)

Withdrawal of the job-related investment discount (BIK)

7 June, 2021

The job-related investment discount was introduced by the Dutch Cabinet at the end of 2020 to encourage companies to continue investing during the Corona crisis. However, during an ‘informal consultation’, the European Commission warned that the BIK scheme could be considered unlawful state aid. The Cabinet therefore intends to withdraw the BIK with retroactive effect from 1 January 2021.

As we reported previously, the Cabinet submitted the BIK to the European Commission at the end of last year. The reason for doing so was that the Cabinet was uncertain as to whether the BIK could be applied at the fiscal unity for corporate tax purposes level without violating European laws and regulations. Informal consultations with the European Commission have now brought to light the possibility that not only could the fiscal unity application be regarded as unlawful state aid, but also the entire BIK scheme.

The Cabinet is not prepared to allow the BIK scheme to continue without the approval of the European Commission. The financial risk for entrepreneurs would be too great. If the BIK scheme were to be designated as unlawful state aid, entrepreneurs would no longer be entitled to the discount with retroactive effect and would have to repay it together with interest. The Cabinet has considered a number of options for making the scheme compliant with state aid, but none of these options would remove the uncertainty that exists for entrepreneurs in the short term.

Now that there is a high level of uncertainty about the implementation of the BIK that cannot be dispelled in the short term, the objective of the BIK is no longer being achieved. The aim of the BIK was in fact to encourage entrepreneurs to make investments in the short term. The Cabinet has therefore decided to repeal the scheme with retroactive effect from 1 January 2021.

A legislative amendment is required in order to repeal the BIK. The legislative proposal has already been submitted to the Council of State for its opinion. After that, the proposal will be submitted to Parliament as soon as possible. The budget that was reserved for the BIK in 2021 will then be used to reduce the contributions paid by employers to the General Unemployment Fund (AWf).

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