Tax reduction for energy saving expenditure: carry forward

The new government has abolished a number of tax reductions for energy saving expenditure. In case you have an 'excess amount' for such an energy saving expenditure which could not be used during previous years, this can now be carried forward to the next years.

Reminder: which investments qualify for a tax reduction

Only the tax reductions for roof isolation expenditure remains in place for 2012 (however reduced from 40% to 30%): for other energy saving expenditure made in 2012 the tax reduction is only applicable when the contract hereto was closed before 28 November 2011.

What is an 'excess amount'?

For investments in 2011 you have right to a tax reduction of 40% of the actual paid expenditure. The total of the different tax reductions for the same year and the same house cannot exceed 2.000€ (base amount, for this income year is the indexed amount 2.930€). If 40% of your investment exceeds 2.930€, the excess amount is in principle lost. Therefore, the excess amount can be carried forward to the next years.

Example

You have made an investment of 10.000€ in 2011. This gives right to a tax reduction of 40% of the expenditure, i.e. 4.000€. The threshold for 2011 was 2.830€. Consequently you have an 'excess amount' (tax credit) of 1.170€ which you cannot report in your tax return of 2012 (income 2011). This 1.170€ can be recuperated as tax reduction in the tax return of 2013, income 2012.

When can the 'excess amount' be carried forward?

The 'excess amount' can be carried forward to the next three taxable periods following the year in which the expenditure is actually made. Anyhow during the next taxable periods the threshold cannot be exceeded.

The carried forward possibility is however subject to the condition that the expenditure relates to a house which has been in use for more than five years.

How is the five year period calculated?

Initially the tax authorities were of the opinion that this period was to be calculated on a day-to-day basis. A new circular letter of 24 February 2012 nuanced this position: it is not always easy to determine the exact date on which the house is taken into use, e.g. when the house is taken into use gradually. To avoid discussions the condition is deemed to be fulfilled when the house is taken into use in the fifth calendar year preceding the calendar year of the start of the works. The tax authorities herewith join the tolerance also applied by the VAT authorities.

Example

A house is taken into use in October 2005. In 2010 you made an investment in solar panels qualifying for the tax reduction. The works started on 12 April 2010. You paid the invoice in June of the same year. On a day-to-day basis, no five years have expired (October 2005 to April 2010) between the taking into use of the house and the start of the works. Based on the initial administrative position, you had no right to carry forward the excess amount. Thanks to the new administrative tolerance you deemed to have fulfilled the condition: the taking into use of the house took place in the fifth calendar year preceding the calendar in which the works started. The exact date is no longer of importance. Consequently carry forward is possible.

Consequences for the assessments for 2011

We consider the example above. Imagine that based on the initial administrative position you came to the conclusion that the 'excess amount' could not be carried forward to the next year. Consequently you did not mention the amount when filling out your tax return in 2011. In this case there is good news for you: you can still correct this and benefit from the tax reduction.

You have two possibilities:

you can appeal against the tax assessment for the year in which you (erroneously) did not carry forward the tax reduction. For this you have a period of six months, counting as from the third day following the sending of the assessment form.

you can apply for an 'ex officio release' of the assessment made for 2011 (income 2010). The new administrative view is after all to be considered as a 'new fact'.