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The impact of the fiscal corona reserve (provision) is not considered in the financial statements 31 December 2019 as the change in tax law was not (substantially) enacted by 31 December 2019.

What’s the issue?

In May 2020, the Dutch government issued a new Decree with a set of tax measures to help companies manage the impacts of COVID-19. One of the measures makes it possible to form a fiscal corona reserve in the 2019 tax return for the expected tax loss over 2020, when certain conditions are met. The question arises how to account for the tax consequences resulting from the fiscal corona reserve in 31 December 2019 and 31 December 2020 financial statements under Dutch GAAP?

Getting into more detail

Changes in tax rates and tax laws are not reflected in the financial statements, unless they have been (substantively) enacted by the reporting date.

The benefit relating to a tax loss that can be carried back to recover current tax of a previous period shall be recognised as an asset.

The impact of the fiscal corona reserve cannot be recognised in the financial statements 31 December 2019 as the change in tax law was not (substantially) enacted by 31 December 2019. Dutch GAAP requires disclosures of changes in the tax laws and tax rates, enacted or announced after the reporting date, if they have a significant effect on current or deferred tax as a post balance sheet event.

In the 31 December 2020 financial statements a loss is carried back to the profit over 2019 and is recognised as a current tax receivable and a credit to income tax in the income statement.

Partner Department of Professional Practice

KPMG Nederland

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