On Wednesday 20 December it was announced that the phosphate rights will be depreciable after all. Carola Schouten, Minister of Agriculture, Nature and Food Quality (LNV), sees the rights as a means to achieve a balance between manure production and sales. She estimates that it will take 10 years for this, which also means an end date, but what does the effect look like?
Lubbert van Dellen, commercial director at Accon avm, indicates that the rights, which will apply from 2018, can be amortized over 10 years. For a long time, the Ministry of Economic Affairs did not want to go along with this. "It's good that there is clarity now."
Depreciable in 2018?
However, now comes the practical side. Dairy farmers have received a relatively high milk price in recent months and therefore have money left over to invest. "Given that the rights can be amortized over 10 years, we assume that the Reinvestment Reserve (HIR) scheme can be applied upon sale."
There is one point of attention for the selling entrepreneur. "We are in discussions with the tax authorities about the application of the HIR to companies that did not actively keep livestock in 2017. Anyone who transferred the references at the end of 2017 and kept animals in 2017 (under the reduction scheme) has a reasonably strong tax file When sold in 2018, there is a very strong file to apply the HIR."
What about depreciation for 2017?
"Those who took over a reference in 2017 cannot depreciate the phosphate rights earlier than in 2018 (after allocation). However, the takeover of references in 2017 can contribute to a saving on the reduction costs for 2017."
Van Dellen explains that July 2, 2015 serves as the reference date. "Under the reduction scheme, taking over references in 2017 means taking over GVE rights and thus saving on the GVE reduction levy. These saved levy costs can be corrected again on the purchase amount in 2017 and lead to deductible costs in 2017."
A calculation example. "For a purchase amount of €200.000 for phosphate rights, this entails a depreciation of €20.000 per year, based on a period of 10 years. Now a dairy farmer has saved €2017 in reduction levy for 25.000 by purchasing the reference. This saving counts as a deduction for 2017. So €200.000 minus €25.000 is 175.000 still to be written off. Which amounts to €17.500 per year for the next 10 years."
Skimming during sale?
Van Dellen says about the 10% skimming off on sales: "We know no better than that it will continue. This is also evident from all communications from the Netherlands Enterprise Agency (RVO.nl)." Extra attention is needed for the generic discount of 8,3%. "We experienced in 2017 that additional information was sometimes required to calculate land-relatedness. We trust that this has been properly incorporated into the phosphate rights decision that dairy farmers will receive in January 2018."
The most important points for the phosphate rights system are now known. Mention the discount of 8,3% when introduced for non-land-based dairy farmers, the depreciation and skimming off upon sale.
Will the banks now also finance again?
Van Dellen indicates that he was successful in securing the financing of references at well-profitable dairy farms. "But reports from the field indicate that for other parties the repayment over 5 years was a bottleneck. You would now expect the repayment to take place over 10 years."
This means a lower amount per year, making more possible. At the same time, it is precisely this lower repayment that is important, so that we can also bear the expected decline in milk prices. Is investing in phosphate wise? Answers that question Boerenbusiness later.