Transfer rights
Phosphate partnerships can work well
Phosphate partnerships are a new concept, but they already appear to be able to work well. This is apparent from the agreements that LTO Nederland has made with the tax authorities. The levy from the phosphate reduction plan also appears to be tax deductible, whereas the fine and levy in the system of phosphate rights are not.
Countus, ABAB, Alfa and Flynth investigated the tax consequences of phosphate rights on behalf of the Association of Accountants and Tax Consultancy Firms (VLB). At the beginning of 2018 there was already clarity about the amortization of the rights. This was also part of the tax questions, but there were still issues that remained unanswered, such as the question of when the rights are a business asset.
When a business asset?
There is not yet a concrete answer to the question of whether rights are a business asset. The VLB indicates that the rights must be used in the company, but there is no fixed period for how long they must be used. "For example, the Tax and Customs Administration indicates that a 'reasonable' term cannot be given in advance. It is up to the inspector to fill in the term."
An important question, because only if something is a business asset and money is made from it, does this money fall under the reinvestment reserve (HIR). The rights that were sold immediately after January 1, 2018 are controversial. The VLB states that, because it is a reference from the past (July 2, 2015), this concerns a business asset. The Tax and Customs Administration does not share this opinion and calls it the disposal of stock. Which means there is still no definitive answer.
It remains unclear what the rights are that were sold on January 1, but there is no discussion about the rights that went into lease. These are asset rights for investment. If the rights are sold, the profit, sale price minus book value, is taxable. Again, the question is whether this is a business asset or not. You can only reinvest in things with a shorter depreciation period than 10 years.
Discount loss of profit
Another topic is the 10% discount on the rights. This discount cannot be immediately deducted from the profit. This discount can be evaded through a so-called phosphate partnership. A new concept since the introduction of the rights. In any case, those partnerships can work well, according to André Verduijn of Countus. "The advantage is that the rights can be carried forward after 3 years. The seller pays no tax, but the buyer cannot write them off either." Verduijn states that forming a partnership must be done with care and that it entails a number of points for attention.
The questions regarding the tax part also concern the levy and fine for phosphate. For example, the levy that took place during the phosphate reduction plan is tax deductible, but the bonus counts as profit.
Violation or misdemeanor
In the phosphate rights system, a fine is imposed. Then it could be a violation or a crime. Here you can opt for a fine, but it is not tax deductible. A violation carries a prison sentence of one year, and for a crime it can be up to 6 years. The difference is that a crime involves intent. What is also new is that the costs that coincide with the crime cannot be deducted from the tax.
It doesn't stop here, there appear to be many more tax issues surrounding phosphate rights. Points of attention are the stopper scheme and the BOR scheme. A term of 5 years applies to the latter, but if you have participated in the stopper arrangement in the meantime, this will have consequences. It continues to be vigilant with regard to phosphate rights.
Have a look at Tax questions and answers about phosphate rights
Photo: Jarretera / Shutterstock.com
Herman van den Pol
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