MIA and the VAMIL (2023): here's what you need to know

Introduction

In the Netherlands, we have three types of investment deduction. In this article we focus on the environmental investment deduction (MIA) and the random depreciation of environmental investments (VAMIL). We explain what it is, when you can apply it and the amounts involved.

What is the environmental investment allowance (MIA) and the random depreciation of environmental investments (VAMIL)?

The environmental investment deduction (MIA) and the random depreciation of environmental investments (VAMIL) are one of three forms of investment deduction.

Environmental Investment Allowance (MIA).

The MIA is an investment deduction that allows you to reduce your taxable profit. Here you may deduct up to a maximum of 45% of your investment amount from your profit. How high this percentage is depends on the environmental impact and the prevalence of your asset.

Random depreciation of environmental investments (VAMIL)

VAMIL is an investment deduction that you may write off at any time. This depreciation may be up to 75%. By depreciating your investment faster, you reduce your taxable profit and pay less tax in that year.

Combination of MIA and VAMIL

Although the MIA and VAMIL are two different schemes, they are often combined by entrepreneurs. This is because both schemes use the same list: the Environmental List. On this list, you can find all business assets eligible for both the MIA and VAMIL.

Terms and conditions of the MIA and VAMIL

There are a number of conditions for taking advantage of the MIA and VAMIL schemes:

• You pay income or corporate tax in the Netherlands
• The asset is listed on the Environmental List
• You have not used the asset before
• The investment is related to the acquisition and production costs of the asset
• Your investment is a minimum of 2,500 euros per asset
• You cannot apply the MIA and VAMIL scheme for the same asset at the same time (you can apply the MIA and the KIA)

Example MIA

The percentage you may deduct from your taxable profit is listed in the Environmental List.

Suppose your company's taxable profit is 70,000 euros and you pay 25% tax on it.

When you make an investment in an asset that is listed on the Environmental List, it is accompanied by a code.

In this example, we assume an asset with code A worth 50,000 euros. With code A, you may deduct 36% of the investment from your taxable profit. In this case, that is 18,000 euros.

This means that instead of paying 70,000 * 0.25 = 17,500 euros in tax, you will have to pay (70,000 - 18,000) * 0.25 = 13,000 euros in tax. Your benefit in this case is then 4,500 euros.

Example VAMIL

Suppose you make an investment in an asset that can be found in the Environmental List, you may deduct 75% of the total purchase amount from your profit in 1 lump sum.

In this example we assume an investment of 80,000 euros, which normally has a life of 10 years with no residual value. So normally, you could write off 8,000 euros per year from profits.

If you use the VAMIL scheme, you can deduct 80,000 * 0.75 = 60,000 euros from your profit.

Read more about investment deduction, and the other two forms small business deduction and energy investment deduction.