Does it make sense that a non-profit organization spends many millions in profit taxes every year? And that the same organization pays millions in taxes due to European rules for multinationals, while it is only active in the Netherlands?
Housing association Stadgenoot doesn’t think so. It is one of the first corporations to file a case against the tax authorities in court, the Amsterdam corporation announced this Thursday. At least seventy other corporations will soon follow. Through the courts, Stadgenoot wants to enforce an exception for corporate tax (profit tax) and the European tax directive ATAD. The procedure can take years and go all the way to the European Court.
Stadgenoot, which is bringing the case with the help of advisors PWC and KPMG Meijburg, has, like almost all large housing associations, objected to the profit tax assessment in recent years. The Tax Authorities rejected Stadgenoot’s objection this year, after which an appeal to the administrative court is the next step. The corporations could not make a collective case because they have to appeal individually to the court after rejection of an objection.
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Housing associations are in a financial bind. The government is holding them to agreements about new construction and sustainability, which will cost them a lot of money. At the same time, the government refuses to exempt corporations from corporate tax. What is even more painful for corporations is that they pay millions in this profit tax every year, while their profit only exists on paper. Because money they earn on new construction, for example, is almost always reinvested in social housing or sustainability.
The Jetten cabinet has now promised corporations to reduce annual corporate tax from 2028 in such a way that they will have to pay approximately 250 million euros less. However, the Tax Authorities continue to fully target the corporate sector in accordance with the European Anti Tax Avoidance Directive (ATAD). This directive was added to corporate tax in 2019 to combat complex financial constructions with which multinationals avoid taxes. As a result of the ATAD, financial institutions may, for example, only deduct interest on money they have borrowed from corporate tax to a very limited extent.
This hits housing associations and project developers particularly hard. They often borrow the maximum for new construction and sustainability of homes, and therefore have to pay a lot of interest. Due to the ATAD directive, they are barely allowed to deduct these interest costs from the (profit) tax, which increases the tax burden considerably.
According to the association umbrella organization Aedes, a paradoxical situation arises: the more housing associations build, the higher their interest costs and therefore the tax burden. The more than 770 million euros per year that corporations together pay in corporate tax will be doubled by ATAD to 1.5 billion by 2029. Aedes calculated. The umbrella organization speaks of a “fine on investments”.
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Financial limit in sight
If Stadgenoot is exempt from the ATAD directive, the corporation would save 16 million euros in taxes annually. “Money that we can then spend on building and making houses more sustainable,” says director and financial director Bas Hendriks by telephone. “By paying interest, you can borrow enough every year to build a thousand new homes.”
Stadgenoot and other corporations want an exception to be made for them from levying corporate tax, or at least from applying the ATAD directive. If that doesn’t work, the corporations will be short of money in the coming years, says Hendriks. “This year we can still make all the investments we want. But from 2030 we will reach the financial limit. Then you will no longer get financing.”
