Netherlands: Details of emergency tax measures (COVID-19)
Netherlands: Details of emergency tax measures
The Deputy Minister of Finance in a 14 April 2020 letter to the Lower House of Parliament included a “policy statement” that further elaborates on the emergency tax measures in the government’s response to the coronavirus (COVID-19) pandemic.
The policy statement contains a number of previously unannounced relief measures, as described briefly below. The provisions in the policy statement are retroactively effective to 12 March 2020.
Retroactive effect, tax-neutral conversions, transformations, business mergers, legal mergers and divisions
- Tax-neutral conversions and tax-neutral transformations: Due to current pandemic circumstances, it may not be possible to realize tax-neutral conversions or tax-neutral transformations with retroactive effect to the beginning of the year within the 15-month period. The tax inspector is authorized to extend this period by three months if the period expires between 1 March 2020 and 31 May 2020.
- Business mergers, legal mergers and divisions: To apply the tax relief for business mergers, legal mergers, and divisions with retroactive effect to the beginning of the financial year, certain legal transactions must be performed within 12 months (legal mergers and divisions) or 15 months (business mergers) of the date on which the tax relief has retroactive effect. The tax inspector is authorized to extend the periods by three months if these periods expire between 1 March 2020 and 31 May 2020.
- Reduction of provisional assessments: Because businesses may expect that their profit in 2020 could be lower than the profit in their provisional corporate income tax or individual income tax assessments, they may file a request with the tax inspector to ask that the assessments be reduced. The tax inspector is to grant this request. If a business has paid more tax than the amount payable after the granting of the request, the difference will be refunded.
- Compensation for entrepreneurs in affected sectors: It was previously announced that the one-off and fixed gift of €4,000 paid out under the Compensation for Entrepreneurs in Affected Sectors COVID-19 (Tegemoetkoming Ondernemers Getroffen Sectoren COVID-19—TOGS) will be tax-exempt. The 2021 Tax Plan package will clarify that this compensation will not be part of the profit of the entrepreneur.
VAT relief for the healthcare sector
- Outsourcing healthcare workers: That the outsourcing of healthcare workers remains outside the scope of value added tax (VAT) has been approved. It does not matter who the “outsourcer” is. A number of conditions do apply so that the VAT benefit of the approval is received by the healthcare institution or healthcare provider.
- The “insourcer” must be a healthcare institution or care facility that applies the VAT exemption.
- The outsourcer must state on the invoice that the approval is being used and must document the information related to the application of the approval in its accounts and records.
- The outsourcer is only allowed to charge the insourcer the gross payroll costs, if necessary, increased by a cost reimbursement of a maximum of 5%, whereby no profit must be envisaged or realized.
The measure does not affect the recovery of the outsourcer’s input VAT. The outsourcing does not give VAT-able persons that perform VAT-exempt services an (additional) VAT recovery right, nor does the application of the approval diminish any VAT recovery right they may have.
- Free provision of medical supplies: No VAT is required to be paid on medical supplies (relief supplies and equipment) that are provided free to healthcare institutions, care facilities, and general practitioners. The “free provision” (no money changing hands) also has no consequences for the recovery of the provider’s input VAT. This provision is subject to medical provisions appearing on the HS classification reference for COVID-19 medical supplies list published by the World Customs Organization. The deduction of VAT on the costs of the free medical supplies is determined as general overhead on the basis of the VAT-able person’s total turnover, with the free provision of the goods being disregarded.
Both measures can be applied retroactively from 16 March 2020 and will be effective until 16 June 2020.
- Reduced VAT rate for fitness lessons offered online: The reduced VAT rate of 90% regarding fitness lessons offered online by gyms and similar VAT-able persons has been approved. This measure can be applied retroactively to 16 March 2020 and is effective until the mandatory closure of gyms is lifted.
Payroll taxes and cross-border workers
- Fixed travel allowance: If employees must work from home for a longer period as a result of the coronavirus pandemic, the fixed travel allowance may no longer be paid out, untaxed, as a specific exemption. To the extent necessary, employers may use their normal travel patterns of employees (meaning that the temporarily changed travel patterns can be ignored). The approval also applies to fixed travel allowances with an agreed recalculation.
- Easing of administrative obligations: During the temporary period, the Dutch tax authorities will adopt a “flexible approach” if employers fail to comply with certain administrative obligations, or do not timely and fully comply with these requirements (i.e., filing the payroll tax statement and confirming an employee’s identity). If these obligations are not correctly complied with, the “anonymous persons” rate must generally be applied in the payroll records. Due to the coronavirus-related measures, it is currently not realistically possible, for example, to confirm the identity of an employee on the basis of a mandatory original identity document. In such instances, the anonymous persons rate does not have to be applied. This is, however, assuming the employer rectifies the administrative obligation as soon as and to the extent that it is able to.
- Border workers and relief provided by Germany: Germany has also taken COVID-19 relief measures including the granting of a number of social security benefit payments. Dutch residents who work in Germany may be eligible for these benefit payments. It is possible that, in certain situations, the right to tax these benefit payments may be assigned to the Netherlands, despite the fact that Germany normally taxes the ordinary employment income of these workers. A proportionate reduction of the Dutch tax that is allocable to the social security benefit payments received by Dutch residents during the period 11 March 2020 through 31 December 2020 is being allowed because Dutch tax could be levied on benefit payments (based on net income) and would cause a reduction in income. This concerns short-term work allowance (Kurzarbeitergeld), bankruptcy money (Insolvenzgeld), and unemployment benefits (Arbeitslosengeld)—payments to which the taxpayer did not yet have a demonstrable entitlement before 11 March 2020.
The Netherlands and Germany agreed how to deal with salaried cross-border workers who work from home during the coronavirus situation. Taxpayers may treat the extra days worked at home in accordance with the rules for the location where they would work under normal circumstances (the “usual” country of employment). The agreement applies from 11 March 2020 through 30 April 2020 and will be automatically extended each month until one of the countries terminates the agreement.
Negotiations are currently taking place with Belgium about a similar agreement.
- Deferral of payment for energy tax and surcharge for sustainable energy (Opslag Duurzame Energie—ODE): Energy tax and ODE are payable on the supply or use of natural gas and electricity. A deferral of payment for energy tax and ODE has been granted, as well as the VAT on these, in four situations (read TaxNewsFlash).
- When an advance invoice is issued or an advance payment is received, no energy tax or ODE (or related VAT) will be charged during the period April - June 2020. One of the conditions is that the final invoice must cover a calendar month. In October 2020 (at the latest), the energy supplier will charge the relevant energy tax and ODE, increased by VAT, by means of an additional invoice, and this amount will then be payable.
- When no advance invoice is issued or no advance payment is received, but an invoice is issued, no energy tax or ODE (or related VAT) will be charged during the period April - June 2020. One of the conditions is that the invoice must relate to supplies for April - June 2020. In October 2020 (at the latest), the energy supplier will charge the relevant energy tax and ODE, increased by VAT, by means of an additional invoice.
- When no advance invoice is issued, no advance payment is received, and no invoice is issued, the energy tax and ODE (or related VAT) for the period April ‑ June 2020 will not be payable on the date when the supply took place, but will be payable 1 November 2020.
- When energy tax and ODE is payable by the user, the energy tax and ODE for the period April - June 2020 will not become payable on the date when the use takes place, but on 1 November 2020.
This measure is effective retroactively from 1 April 2020.
- Late-payment interest and payment discounts: Previously, the government announced that as of 23 March 2020, the late-payment interest rate for all tax debts would be reduced from 4% to 0.01% for a period of three months (read TaxNewsFlash). The policy statement implemented this relief. The temporary reduction does not apply to late-payment interest that the tax collector must refund. Also businesses that, as a result of the reduction of the late-payment interest rate, can no longer claim a payment discount—due to the fact that late-payment interest is linked to the payment discount—but may file a notice of objection against the decision setting the amount of the payment discount, after which the difference will be determined. This measure is retroactively effective from 23 March 2020.
- Private motor vehicle and motorcycle tax: Vehicle inspection appointments have been canceled. This action has consequences for the application of several legislative and regulatory provisions concerning the private motor vehicle and motorcycle tax (Belasting van personenauto’s en motorrijwielen—BPM) related to registration in the vehicle registration register. As a result, there are three temporary measures:
- Until 1 July 2020, the exemption for short-term use of a motor vehicle with a foreign license plate by a Dutch resident may be renewed (for a second time) by the same person for the same motor vehicle.
- The last day for the “transitional rules” for private motor vehicles that are converted to taxis to, for example, transport wheelchairs, is now 1 July 2020 (previously 1 April 2020).
- With regard to the BPM tax return, until 1 July 2020, it will be possible to use a valuation report that was prepared no more than four months before the date on which the tax is payable. However this must not be earlier than 16 February 2020.
Read an April 2020 report prepared by the KPMG member firm in the Netherlands
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