Under Dutch law, transactions involving the purchase and sale of emission allowances are generally considered to be a taxable supply for VAT purposes. The VAT Directive offers Member States the possibility to subject supplies of emission allowances to the VAT reverse charged mechanism, in which case the VAT is due by the buyer of the emission allowances. This option has been implemented in the Netherlands.

For shipping companies operating within and outside the Netherlands, potential VAT implications and VAT reporting obligations should be reviewed carefully. For instance, a (foreign branch of a) Dutch shipping company purchasing emission allowances on the EU market may face VAT obligations depending on the seller's location and the transaction's structure, and it may vary by country whether the VAT reverse charge mechanism is applicable. Proper VAT registration, documentation, and compliance measures are required to ensure that the shipping company is considered compliant with these rules.
 

In the Netherlands, the costs associated with purchasing emission allowances may affect the corporate tax base. Typically, these costs can be deducted as business expenses, reducing the taxable profit of the company. However, the deductibility of these costs could depend on the nature of the expense and the specific facts and circumstances.

For example, a Dutch shipping company that purchases allowances to cover its emissions for EEA voyages can generally deduct these costs from its taxable income. However, if the allowances are bought for speculative purposes or held as investments, the deductibility may be restricted or subject to different rules. Companies should carefully evaluate the nature of their allowance transactions to determine the appropriate tax treatment.

Some shipping companies may also employ specific procurement strategies, such as hedging, to manage the financial risk associated with fluctuating prices of emission allowances. Hedging involves entering into financial contracts to lock in prices for future purchases, which can stabilize costs but also introduce additional tax complexities. For example, gains or losses from hedging transactions may be subject to different tax rules than the underlying allowance transactions. If these hedging contracts are managed centrally by a Dutch entity for other group entities, further transfer pricing implications may arise.

If a shipping company establishes a central entity within the group, such as a Dutch entity, to handle the purchase of all emission allowances, significant transfer pricing considerations may arise.

For instance, if a Dutch entity is designated as the central purchasing hub for all allowances for the group, and it subsequently sells these allowances to other group entities (e.g., operating companies in Greece, Spain, or Germany), it would be necessary to determine the appropriate remuneration for the Dutch entity based upon its functions performed, risks assumed, and assets utilized. This may result in concluding that the activities of the Dutch entity can be characterized as a service (central purchasing hub with no risk), or alternatively as a party to the sale of the emission allowances (where the Dutch entity also manages and controls certain risks). Furthermore, as mentioned above, if the group manages its financial risk resulting from the fluctuating prices of the emission allowances through hedging activities, it would be necessary to ensure that such hedging activities are appropriately remunerated from a transfer pricing perspective. It is therefore crucial to understand the functions performed, risks assumed, and assets utilized by the Dutch entity, as well as the other parties involved in the transactions, to ensure an appropriate transfer pricing policy is implemented. The group should also maintain adequate transfer pricing documentation to justify the arm’s length nature of the pricing of the transactions between the parties.

Shipping companies that benefit from the Dutch tonnage tax regime should assess whether the costs associated with emission allowances affect their eligibility or the calculation of their taxable base. The Dutch tonnage tax regime allows companies to calculate their taxable profit based on the net tonnage of their fleet, typically resulting in a lower tax base compared to the standard corporate tax regime.

For instance, if a company under the Dutch tonnage tax regime incurs significant costs related to emission allowances, it must determine whether these costs are deductible within the tonnage tax framework. Given the complexities of how the Dutch tax authorities may interpret these rules, aligning with them early can help avoid unexpected tax assessments and ensure compliance.