Housing associations are in danger of succumbing to a rising tax burden. In recent years they paid approximately 700 million euros in profit tax, this year it is 1.1 billion and that amount threatens to increase to 1.5 billion in 2027. Under these circumstances they will hardly be able to fulfill their promises about new construction (300,000 homes). up to and including 2030) and to make existing homes more sustainable.
This is what Aedes, the association of corporations, writes in a report that, not coincidentally, was made public this week – the House of Representatives is currently discussing the budget of Housing Minister Hugo de Jonge. This year, corporations will pay an average of 477 euros in corporate tax for each social housing home, Aedes writes, ‘almost a full month’s rent’.
Corporations do not have a profit motive. Yet they are assessed for what they have left when they deduct their expenses from their income. The costs of new construction and sustainability are considered investments, not expenses, and may therefore not be deducted from the taxable profit. Not even if investments are unprofitable and corporations will therefore never become rich from them – and unprofitable investments are an ‘essential characteristic of corporations’, Aedes writes. ‘Housing associations are therefore taxed for a profit that they have not actually achieved.’
‘Fine’ on contributions to public housing
Paradoxically, the increase in profit tax is partly due to the fact that another tax was abolished this year, the landlord levy. This cost corporations 1.7 billion euros per year, and because corporations no longer have to pay it, their ‘profit’ increases. Corporations have promised to invest the money saved in new construction, but a large part of it now flows back to the treasury. At the expense of new construction, among other things.
And then corporations also feel disadvantaged by the so-called Atad rules, European tax rules that are intended for multinationals that engage in tax avoidance. These rules are intended to prevent them from reducing their profits (and therefore their taxes) by unbridled deduction of interest costs. In the Netherlands, corporations also fall under the Atad rules, which means they can no longer deduct interest costs from their profits.
Very harmful, Aedes argues, because corporations have to borrow to invest money in new construction. The fact that the interest is not deductible therefore works as ‘a penalty for making a contribution to public housing’. Fluctuations in interest rates quickly have major financial consequences, and ‘this uncertainty also hinders investment planning’.
Not a sustainable business model
The Housing Corporation Authority, which supervises the sector on behalf of the government, already warned about these types of effects last spring, and with new calculations, Aedes is now mapping the financial consequences more precisely. She already did that two years ago, and the tax burden appears to be rising faster than anticipated at the time. There are corporations that will be in trouble before 2030.
Those Atad rules should not apply to us, the corporations have been arguing for some time, and the Housing Corporation Authority agrees with them. According to Aedes, it is also ‘undesirable in principle’ for corporations to pay corporate tax. Many organizations that perform government tasks and do not strive for profit, such as schools, are exempt. Why not us, the corporations wonder.
Minister De Jonge is aware of the situation of the corporations. The agreed 300,000 new-build homes are still ‘largely financially feasible’, he reported just before the summer. But in the longer term it is ‘unsustainable’ that corporations have to borrow more and more. ‘I encourage corporations to continue investing in the coming years,’ he wrote, ‘but I can only credibly call for this if I also recognize that we need to look more closely at the longer term.’
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