What a manufacturing company loses by postponing a heat pump until 2027 for the higher Energy Investment Allowance

The managing director of a food company had had the quotation for an industrial heat pump on his desk for three weeks when he read on Budget Day (Prinsjesdag) that the Energy Investment Allowance is going up next year. His first calculation was quick: 5.5 percent extra allowance on €600,000 is €33,000. He called the supplier to ask whether the order could wait until January.

That calculation is wrong. The 5.5 percentage points are a deduction from taxable profit, so net the difference is about a quarter of that. The year that counts is the year in which you enter into the obligation, and that is a different moment from delivery. Meanwhile, for every month the installation starts later, the gas bill keeps running at the current price.

With an energy investment that pays for itself, the tax benefit is the smallest number in the calculation and the energy saving the largest. The planning should rest on the largest number.

We earn our money with calculations like this, so read the conclusions below with that in mind.

What the 2027 Tax Plan changes about the EIA, and what is not yet certain

The cabinet submitted the 2027 Tax Plan package on 15 September 2026. According to Taxence (tax trade journal, 15 September 2026), the bill states that the deduction percentage of the Energy Investment Allowance will go structurally from 40 to 45.5 percent as of 1 January 2027. The press release from the Rijksoverheid (Dutch central government, 15 September 2026) rounds that to 45 percent and states that the House of Representatives will debate the package from October and the Senate in December. Both votes have yet to take place. Until then, 45.5 percent is an intention.

For 2026 the rules apply as the Belastingdienst (Dutch Tax Administration) publishes them: 40 percent of the investment amount may be deducted additionally from taxable profit, the asset must be new and on the Energy List (Energielijst), the amount is at least €2,500 per asset, and the investment must be notified to RVO within three months. The allowance comes on top of ordinary depreciation. The EIA can be combined with the small-scale investment allowance (kleinschaligheidsinvesteringsaftrek, KIA). It cannot be combined with the environmental investment allowance (milieu-investeringsaftrek).

What counts as investing is where the managing director from the opening went wrong. The Belastingdienst defines investing as entering into an obligation to acquire or improve an asset, and gives as examples accepting a quotation in writing, verbally accepting a purchase proposal and concluding a purchase agreement. The brochure Energielijst 2026 van RVO (December 2025) says the same: the moment at which you can determine what you have bought at what price, often the signature on the purchase contract, but also a verbal or digital order. The year of signature is the investment year, even if delivery, payment and putting into use fall in a later year.

Behind that sits a second rule that few of the managing directors we speak to know. If the asset is not yet in use at the end of the financial year, according to the same Tax Administration page you may only claim investment allowance in that year up to the amount you have paid in that financial year. The rest carries forward to the following years, at the latest to the year it is put into use. If you sign in December 2026 and pay a 30 percent deposit, you therefore deduct 40 percent of that deposit in 2026 and the rest later.

What theory says about postponing when a tax incentive is announced

House and Shapiro (American Economic Review, 2008, peer reviewed) show that the intertemporal elasticity of investment in long-lived capital goods is almost infinite: because a machine lasts twenty years, it makes hardly any difference to its value whether it is bought in December or January, so a temporary tax benefit shifts the moment of purchase substantially. For US bonus depreciation they find an investment elasticity between 6 and 14. A higher allowance that only starts in January gives companies an incentive to skip December for the same reason.

Zwick and Mahon (American Economic Review, 2017, peer reviewed) analysed over 120,000 US companies and found that accelerated depreciation increased investment in the assets concerned by 10.4 percent in 2001 to 2004 and by 16.9 percent in 2008 to 2010. Small companies responded 95 percent more strongly than large ones. According to them, companies responded strongly when the scheme produced cash immediately; when the benefit only came in a later year, the response largely did not happen. Maffini, Xing and Devereux (American Economic Journal: Economic Policy, 2019, peer reviewed) found on UK corporate tax returns that a higher first-year allowance for smaller companies in 2004 raised the investment rate by 2.1 to 2.5 percentage points, and that this effect comes mainly from lower capital costs and not from easing financing constraints.

McDonald and Siegel (Quarterly Journal of Economics, 1986, peer reviewed) calculated the value of waiting with an irreversible investment: as long as the return is uncertain, delay has an option value. Gulen and Ion (Review of Financial Studies, 2016, peer reviewed) show at company level that policy uncertainty depresses investment, most strongly at companies whose investment is hardest to reverse. A heat pump custom-built into a factory is such an investment. The only question is where the uncertainty lies. In this case it lies in the deduction percentage, and that difference is small and limited. The return on the installation itself, the energy saving, is much larger and starts on the day it runs.

SEO Economisch Onderzoek en CE Delft (policy evaluation 2017 to 2021 commissioned by the ministry, published July 2023; a research report, not peer reviewed) calculated that the net tax benefit averaged about 12 percent of the investment amount, that about half of the notified investments would also have been made without the scheme, and that the generic deduction percentage has only a limited effect on willingness to invest. Their recommendation was a further reduction of the percentage; the cabinet is now proposing an increase. According to that evaluation, for half of the notified companies the EIA was a windfall after the fact on an investment they were making anyway.

Worked example: a food company with a €600,000 heat pump

In this worked example a producer of chilled meal components has revenue of €14 million, profit before tax of €520,000 and 70 employees. Process water for cleaning, blanching and pasteurising is brought to 65 degrees with a gas boiler. The company is considering an electrically driven industrial heat pump with heat recovery from the cooling installation, investment amount €600,000 including installation, lead time five months. We assume the installation meets a code on the 2026 Energy List; under code 221103 the RVO brochure lists an electrically driven heat pump with a COP of at least 4.0 at a temperature difference of up to 40 degrees. Check with RVO whether your installation qualifies before you sign.

For this process the company uses 300,000 cubic metres of gas per year at an all-in price of €1.00 per cubic metre, an assumption in this example, so €300,000. A cubic metre of natural gas yields 9.77 kilowatt hours gross calorific value; at a boiler efficiency of 90 percent that is 2,637,900 kilowatt hours of heat per year. A heat pump with a COP of 4.0 makes that heat with 659,475 kilowatt hours of electricity; at an assumed €0.17 per kilowatt hour that is €112,100. The saving is €187,900 per year, €15,660 per month, before tax. The payback period is 3.2 years without the EIA and 2.9 years with the 2026 allowance.

In 2026 the Belastingdienst uses two corporate income tax (vennootschapsbelasting) brackets: 19 percent up to €200,000 of taxable profit and 25.8 percent above that. Without the EIA this company pays 38,000 plus 82,560 on €520,000 of profit, which is €120,560. If it signs in 2026, the allowance is 40 percent of 600,000, which is €240,000. Taxable profit becomes €280,000 and the tax 38,000 plus 20,640, which is €58,640. The benefit is €61,920. If it only signs in January 2027 and the percentage does go to 45.5, the allowance is €273,000, taxable profit €247,000 and the tax €50,126. The benefit is then €70,434. The difference between the two years is €8,514. The managing director's €33,000 was the difference in allowance; the difference in tax is 25.8 percent of that. Both benefits fall entirely in the higher bracket, so they are 25.8 percent of the allowance.

The last column is the number that was missing on the managing director's desk. If he signs now, the heat pump runs from March 2027 after five months of lead time and a month of installation. If he signs in January, that becomes July 2027. Four months without the saving is €62,600; because that saving would otherwise have been taxed as profit at 25.8 percent, the net loss is €46,500. Against that stands €8,514 of extra allowance benefit. For every month of delay the company loses €11,620 of saving net, so after 22 days the tax difference has evaporated and every further day of delay costs the company over €380 net.

In cash flow terms the tax difference shrinks further. The Dutch Tax Administration settles the 2026 benefit in the assessment for 2026, which you file in 2027, or earlier if you have the 2026 provisional assessment (voorlopige aanslag) reduced now. The 2027 benefit comes a year later. At a cost of capital of 5 percent, €70,434 in a year's time is worth €67,080 today, and the difference with signing now shrinks from 8,514 to €5,160. If you finance your working capital at the bank at 8 percent, €3,300 is left. How the timing of tax on profit feeds through into your liquidity is something we calculated earlier in the article on a hardware reseller that pays tax on profit it does not have.

Why the average benefit of 12 percent tells you nothing

The SEO and CE Delft evaluation mentions an average net benefit of about 12 percent of the investment amount. That average hides two things that determine the outcome for your company: the rate at which the deduction falls and whether there is profit to set it against.

In the worked example the entire deduction falls in the 25.8 percent bracket, so a 40 percent allowance is net 10.3 percent of the investment and 45.5 percent is net 11.7 percent. If the company makes €300,000 profit, a €240,000 deduction pushes taxable profit down to €60,000. Part of the deduction then falls in the 19 percent bracket. The benefit is €52,400 in 2026 and €58,670 in 2027, a difference of €6,270. For a private limited company whose taxable profit stays below €200,000 even without the deduction, the whole deduction is worth 19 percent: 40 percent becomes net 7.6 percent of the investment and 45.5 percent becomes 8.6 percent.

An investment allowance is a deduction from profit. If the company makes a loss in the year of signing, the allowance increases the loss and the benefit only comes when that loss is offset against profit from another year. Zwick and Mahon found that companies without immediate taxable profit hardly respond to an incentive that only produces cash in a later year. For a manufacturing company that closes 2026 with a loss and expects a profit again in 2027, the year of signing may therefore matter, for a different reason than the percentage. That is a question for the adviser.

What an acceptable outcome is and when you achieve it

At manufacturing companies we see that the EIA takes two forms in an investment decision. With an installation that pays for itself within four years, like the heat pump above, the allowance is a windfall that shortens the payback period by a few months. The decision stands apart from the percentage, and the moment of signing follows from the lead time and the production planning. With an installation with a payback period of eight to twelve years, such as insulating an old hall or a district heating connection, the allowance is an essential part of the business case. There 5.5 percentage points can make the difference between doing it and not, and there waiting for the law is a defensible choice. The table below shows, per phase of the decision, what is acceptable in this worked example.

The row about paying is the row missing from most contracts we see. A supplier of process installations often asks for 30 percent on order, 60 percent on delivery and 10 percent on completion. If you sign in September 2026, you pay €180,000 in 2026 and €420,000 in 2027, and the installation only runs from March. In 2026 the allowance is then limited to 40 percent of €180,000, which is €72,000, net €18,576. The allowance on the remaining €420,000 carries forward to 2027, the year of payment and putting into use. Which percentage applies to that carried-forward part, that of the year of the obligation or that of the year of payment, is something to ask your adviser before you sign the payment schedule. We read the scheme as meaning that the year of the obligation determines the percentage. Have that confirmed.

How to decide whether to sign for the EIA in 2026 or in 2027

Put the net saving per month next to the net tax difference between the years. In the worked example that is €11,620 against €8,514. If the saving is larger than the difference, the first month of production beats the law. Only if the tax difference turns out larger is waiting worth considering, and then the business case is probably thin anyway. This is the calculation we make first for every energy investment.

Calculate the allowance at your own rate. Take your expected taxable profit for 2026, deduct the EIA allowance and calculate the tax in both situations with the 19 and 25.8 percent brackets. The difference is your benefit, and at €520,000 profit that is €61,920 and at €300,000 profit €52,400.

The date of the obligation is the date you record. The year of the signature is the investment year; notification to RVO within three months is a hard condition according to the Dutch Tax Administration and the RVO brochure. At manufacturing companies we see a quotation accepted by email and the formal order following weeks later; the date of that email counts.

Reduce the provisional assessment. The €61,920 benefit in 2026 comes into cash as soon as the Tax Administration adjusts the 2026 provisional assessment, instead of with the final assessment in 2027 or 2028. That needs a request your adviser can submit within a week.

The payment schedule should match the year. If the installation is not yet running on 31 December, the allowance in that year is limited to what you have paid. If you want the benefit in 2026, a higher deposit in 2026 is an option; that costs you liquidity that you have to weigh against the interest on your overdraft facility, and how such an investment affects your credit room is covered in the article on an installation company that gets stuck at the bank.

Follow the debate in parliament without hanging your planning on it. If the Senate adopts 45.5 percent in December, whoever signed in 2026 has left €8,514 on the table on a saving of €187,900 per year. If the proposal fails or is delayed, whoever waited has paid the old gas bill for four months, €46,500 net in the worked example, with nothing to show for it.

When this does not apply

The worked example assumes an installation with a short payback period and a company with profit in the higher bracket. With an investment with a payback period of ten years, the monthly saving relative to the investment is about a third of that in the example, and then the tax difference can be larger than a month of saving. If a company closes 2026 with a loss, the allowance in 2026 yields no cash and 2027 may be the better year for that reason. If a company has already invested so much in 2026 that the allowance becomes larger than the profit, part of the benefit falls in a later year anyway and the 2027 percentage weighs more heavily.

We do not give tax or legal advice. This article describes the rules as the Dutch Tax Administration, RVO and the bill publish them, and shows what you need to seek advice on. In any case take these questions to your adviser: which moment in your contract counts as entering into the obligation; which percentage applies to the part of the allowance that carries forward to the year of payment; what the EIA does to your 2026 provisional assessment and tax interest; whether the installation exactly meets the code on the Energy List; and whether the 2027 Tax Plan changes anything about the small-scale investment allowance if your investment stays below €398,236.

The do-it-yourself version

The proper method is an investment analysis per installation with the energy saving per month, the tax benefit per year at your own brackets, the payment schedule and the cash flow from the provisional assessment in one overview, updated as soon as the Tax Plan has passed parliament. That needs a controller who can put the tax and the operational side next to each other.

The do-it-yourself version fits on one A4 page. Take the investment amount from the quotation and the saving per year from the supplier's energy calculation. Divide that by twelve and multiply by one minus your rate, so by 0.742 at 25.8 percent; that is your monthly saving after tax. Multiply the investment amount by 0.055 and by your highest rate, 25.8 percent with a profit above €200,000, 19 percent below that. That is the tax difference between signing in 2026 and in 2027. Divide that difference by the monthly saving after tax and you have the number of months of delay you can afford. In the worked example: 15,660 times 0.742 is €11,620 per month; 600,000 times 0.055 times 0.258 is €8,514; 8,514 divided by 11,620 is 0.7 months. If you stay below that, sign now. How to keep calculations like this in a monthly cycle instead of once a year is covered in the article on rolling forecasts.

Frequently asked questions about the EIA increase in the 2027 Tax Plan

Should I postpone my heat pump investment until 2027 for the higher EIA?

Put the tax difference next to the saving. With a €600,000 investment and profit in the higher bracket, the difference between a 40 and a 45.5 percent allowance is €8,514 net. If the installation saves €15,660 per month before tax, €11,620 after tax, you have lost that difference after 22 days of delay. Only with a long payback period or a loss year in 2026 can waiting pay off.

How much difference does a 45.5 percent EIA make compared with 40 percent?

The difference is 5.5 percentage points of extra deduction from profit, and that deduction is worth the corporate income tax rate net. At 25.8 percent that is 1.42 percent of the investment amount, at 19 percent it is 1.05 percent. On €600,000 that is €8,514 or €6,270. The central government press release rounds the new percentage to 45; according to Taxence the bill says 45.5.

Which year counts for the EIA: ordering, paying or putting into use?

The year in which you enter into the obligation, according to the Dutch Tax Administration and RVO the moment at which you can determine what you have bought at what price, usually the signature or the accepted quotation. If the installation is not yet in use at the end of that year, the allowance in that year is limited to the amount you have paid; the rest carries forward. Notify RVO of the investment within three months of signing.

Is the EIA increase in the 2027 Tax Plan already certain?

On 16 September 2026 it is a bill that has been submitted. The House of Representatives debates the package from October, the Senate in December, and both votes have yet to take place. If you make your investment depend on the percentage, you are waiting for a vote, and meanwhile paying the old energy bill.

How do I calculate the net tax benefit of the EIA for my private limited company?

Take your expected taxable profit, deduct 40 percent of the investment amount and calculate the corporate income tax in both situations with the 2026 brackets: 19 percent up to €200,000 and 25.8 percent above that. The difference is your benefit. At €520,000 profit and a €600,000 investment that is €61,920; at €300,000 profit it is €52,400, because part of the allowance falls in the lower bracket.

Do I get the EIA if my company makes a loss in 2026?

The allowance then increases your loss. The benefit only comes when that loss is offset against profit from another year. Zwick and Mahon (2017) found that companies without immediate taxable profit therefore hardly respond to such a scheme. If you do expect a profit in 2027, that is a reason to discuss the year of signing with your adviser, regardless of the percentage.

Can I combine the EIA with the small-scale investment allowance?

Yes, according to the Dutch Tax Administration an investment may qualify for both EIA and KIA at the same time; the combination with the environmental investment allowance is not permitted. In 2026 the KIA runs up to a total investment amount of €398,236; above that amount, as in the worked example, the KIA is zero. Whether the 2027 Tax Plan changes anything about the KIA is a question for your adviser.

Further reading: Why a hardware reseller pays tax on profit it does not have when memory prices rise, Why a profitable installation company gets stuck at the bank as soon as it grows faster than its profit allows, Rolling forecasts: steering in a moving market and Why a profitable SME still gets stuck on cash flow. New: Why a machine with a 3.2-year payback period costs €434,375 in year one.

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