Mid-2024 the Dutch Senate adopted the long-awaited Inframarginal Electricity Levy, otherwise known as the temporary “electricity windfall tax.” This temporary tax is based on an EU-wide regulation from the European Commission. Electricity producers falling under its scope, be aware: The filing deadline of both the tax return and the so-called “market revenue report” is 31 March 2025!

Aim: Targeting windfall profits due to rising energy prices

The temporary tax targets the profit surplus, or “windfall profits,” of electricity producers resulting from rising energy prices in 2022 and 2023, meaning that an income cap applies for electricity producers during this period. Income up to the cap is not subject to (exempt from) the temporary tax. Income exceeding this cap is taxed at a rate of 90 percent.

Target group: Scope and income cap

Inframarginal electricity producers (using solar, wind, hydropower, solid biomass, biogas, waste, nuclear energy and coal to produce electricity) with an installed capacity of 1 megawatt (MW) or more fall under the tax’s scope. This temporary tax only targets the profit surplus realized in the seven-month period, from 1 December 2022 to 30 June 2023.

The general income cap is €130 per MWh, calculated on the basis of monthly average prices. There are various exceptions from—and deviations to—this general income cap. If an electricity producer’s income did not exceed the relevant income caps in the respective period, no windfall tax is due.

Compliance obligations: Tax return and market revenue report

There are two parts to the compliance obligations—the tax return and the “market revenue report.” Both the tax return and the market revenue report must be filed no later than 31 March 2025.

Assessment of submitted tax returns and collecting the tax due falls under the purview of the Dutch tax authorities. The submitter is responsible for preparing the tax return (calculating and reporting the tax due). Note that failure to file (or late filing of) the tax return or failure to pay (or late payment of) the tax due is subject to administrative penalties.

The market revenue report is subject to oversight and enforcement by the Dutch Emissions Authority (NEa). The NEa also handles any substantive disputes concerning taxable market revenues. A “template” market revenue report is available on the website of the NEa.

Questions or need any help?

If you have any questions in respect of the temporary electricity windfall tax, or need any help with the preparation and filing of the tax return and market revenue report, please let us know!

This contribution was published in the January 2025 edition of the Pulse newsletter. Click here to access the other articles in this edition.