Netherlands: Agricultural VAT exemptions to be abolished?
Currently, the Dutch tax regime exempts farmers, livestock farmers, gardeners and foresters from paying VAT. This means that they do not need to charge VAT or need to have a VAT administration in place. On the other hand, this implies that they cannot deduct the VAT charged to them (input VAT).
For most farmers this regulation is attractive, but they are free to opt out of this particular regime. A farmer who chooses to be subject to VAT must charge VAT and keep a VAT administration, but is allowed to deduct input VAT. Obviously, a farmer wants to opt for VAT registration in case he has input VAT exceeding output VAT. With this the input VAT is not a business cost. It is likely that these exemptions will be abolished as per 1 January 2018.
The agriculture exemption in the Dutch Income Tax Law exempts value changes of agricultural land from taxation, but only exempts changes in the value of land used for agriculture. For example, changes in value due to changes in a destination plan are subject to income tax.
The exemption only applies to changes in the value of agricultural land. The subsoil of buildings is also regarded as agricultural land. Please note, that it only land used for agricultural activities is exempted. If a farm has other activities such as leasing of land, then the land used for those activities is not covered by the agricultural exemption for income tax.
Abolition of agricultural exemption
The Dutch agricultural exemption has a contentious history. In 2010, a Committee for Taxation advocated its abolition. However, this has not yet happened in 2017. As many (tax) exemptions to the agriculture industry have been abolished (such as the agricultural regime for VAT), the question remains whether this exemption will still be in force in 2018.