close
Share with your friends

Netherlands: eRecognition mandatory for businesses filing their own tax returns

Netherlands: eRecognition mandatory for businesses

A bill referred to as the Digital Government Act (Wet digitale overheid) (file no. 34 972) sets out foundations for further digitization, including regulation of digital government and, more specifically, facilities within the governmental “generic digital infrastructure” (GDI). The bill contains the most urgent regulatory issues, including:

1000

Related content

  • The authority to make certain standards mandatory in the government’s electronic traffic
  • Rules for information security
  • Responsibility for the management of facilities and services within the GDI
  • Digital access to public services for citizens (natural persons) and enterprises (legal entities and companies)


Tax return implications and eRecognition

As of 1 January 2020, these developments also affect the tax practice. Businesses filing their own tax returns must make use of eRecognition (eHerkenning) (level 3) in order to log on to the Dutch tax authorities' tax return portal. Initially, this only applies to payroll tax returns (returns for January 2020 and subsequent periods) and corporate income tax returns (as of the 2019 tax year). No transitional deadline has yet been determined for value added tax (VAT). Sole proprietors can continue to use DigiD. In addition, eRecognition does not apply to businesses that outsource their tax returns or file them via professional tax return software.

eRecognition currently provides the highest level of login reliability and enables government bodies to reliably determine the identity of businesses and legal entities digitally. This is intended to allow for the secure exchange of confidential information, such as personal and sensitive information.


Challenges

In December 2019, parliamentary questions were asked about this change in the communication with the Dutch tax authorities, and this gave rise to a number of issues and obstacles.

First, there is the fact that eRecognition can be purchased from commercial parties for a fee of between €30 and €45 per annum. This has been criticized because it means that taxpayers have to pay in order to be able to file tax returns. The Minister of the Interior and Kingdom Relations, also on behalf of the Deputy Minister of Finance, defended the charging of such costs by arguing that eRecognition has a much broader operation than merely communicating with the Dutch tax authorities.

Second, there is the issue of the capacity of the commercial parties providing eRecognition. At the end of 2019, there was a flood of applications and the wait time increased to a few weeks rather than a few days in some instances. This means that businesses at other peak moments (for example, shortly before 1 March 2020 when the payroll tax returns for January 2020 must be filed) will not be able to file these returns on time due to the long application processing time.

Third, certain businesses are currently refused eRecognition—for instance, businesses that are not registered in the Trade Register of the Chamber of Commerce (Kamer van Koophandel) because a Chamber of Commerce number is a requirement for the granting of eRecognition. This can apply, for example, to professional partnerships (maatschappen), general partnerships (vennootschappen onder firma) and open mutual funds (open fondsen voor gemene rekening). This means these businesses cannot file returns in the prescribed manner.

The Minister indicated that the late filing of returns will be dealt with leniently if businesses are confronted with one of these three situations. Businesses that do not expect to be able to obtain eRecognition in time to comply with their obligation to file tax returns will, however, have to request a deferral for the filing of the return in question. According to the Minister, this deferral will be granted, so that no penalty will be imposed.


KPMG observation

Businesses that file their own payroll tax or corporate income tax returns via the portal of the Dutch tax authorities need to consider applying for eRecognition, and if the application is not successful, then note that:

  • For tax returns, a written request must be made before the deadline for filing the return has expired, with explicit reference to the issue with eRecognition and possibly also referring to the Minister’s undertaking (made in the letter from the Minister of the Interior and Kingdom Relations dated 17 December 2019, no. 2019-0000665073).
  • For remittance-based taxes, such as payroll tax, taxpayers are not only obliged to file the tax returns on time, but must also pay the tax due on time. This payment obligation is not covered by the Minister’s undertaking. Only in a situation when the request for a deferral for filing the tax return has been granted before the payment deadline has expired (before 1 March 2020) does the granted deferral also apply to the payment of the payroll tax due. In all other situations, the payroll tax must be paid before 1 March 2020. Taxpayers may make this payment with reference to the tax return that has not (yet) been filed.

Read a January 2020 report prepared by the KPMG member firm in the Netherlands

The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.

Connect with us

 

Want to do business with KPMG?

 

loading image Request for proposal