The corona pandemic is also having a profound impact on the Dutch business community. The financial-economic consequences are considerable. For this reason, by several letters sent as from March 2020, the Dutch Government announced and/or extended multiple (tax) measures to support Dutch employees, self-employed persons and the Dutch business sector. By letter dated April 14, 2020 the Deputy Minister of Finance released the Corona Crisis Emergency Measures Decree (hereinafter: the Decree) which further elaborates on the (announced) emergency tax measures by means of the granting of specific approvals. In June 2020 the Government extended various measures of the first emergency package (Emergency package 1.0) in time until October 1, 2020 and supplemented it with new measures (Emergency package 2.0).
Reduction late payment interest and interest on tax due
- The Netherlands has reduced the “late payment interest” for all tax debts from 4% to 0.01%. Late payment interest is normally due if an assessment is not paid on time (from the time that the payment term has expired). This measure was implemented with retroactive effect as of March 23, 2020 and will apply until October 1, 2020.
- The Netherlands has also reduced the rate of interest on tax due for all taxes to which this applies from 8% (corporate income tax) and 4% (other taxes) to 0.01%. Interest on tax due is payable if an assessment cannot be imposed before the deadline, for example because the tax return is not filed on time or for the correct amount. The reduction to 0.01% applies also until October 1, 2020 and has taken effect from 1 June 2020, with the exception of personal income tax for which an effective date of 1 July 2020 applies.
Deferral of tax payments due to the impact of the coronavirus (COVID-19)
- In the Decree the Deputy Minister of Finance approves that every business that is facing financial difficulties as a result of the coronavirus (COVID-19) crisis will be eligible for a deferral of payment on request for a large number of relevant taxes for businesses, i.e. payroll tax and social security contributions, VAT, personal income tax/national insurance contributions, income-related contributions for health insurance under the Health Insurance Act, corporate income tax, tax on games of chance, insurance premium tax, the landlord levy (verhuurderheffing), private motor vehicle and motorcycle tax (BPM, as of the period May 2020) environmental taxes (energy tax and the surcharge for sustainable energy and climate transition (Opslag Duurzame Energie en klimaattransitie; ODE), coal tax, waste tax, tax on tap water), excise duties and consumption tax on non-alcoholic drinks. According to the Decree, this measure was implemented with retroactive effect as of March 12, 2020.
- As soon as the request is received, the Dutch tax collector will, in principle, immediately put the tax collection measures on hold for a period of three months. A request for a deferral of payment can be made via the website of the Dutch tax authorities, using a simple online form or via a written request.
- Requests for a deferral of payment of longer than three months can also be submitted in writing or via an online form. The following conditions apply to such requests: (i) The current payment problems necessitate a longer deferral; (ii) These payment problems arose mainly as a result of the corona crisis; (iii) The obligation to file a tax return was complied with in respect of the tax debt for which a deferral is requested; (iv) The requested deferral relates to one or more taxes that fall under the approval; (v) If the total tax debt at the time the request for deferral of payment is received amounts € 20,000 or more, then an expert third party statement is required; and (vi) With respect to requests for a deferral of payment of longer than three months made on or after June 19, 2020 an additional requirement applies, which entails that businesses must state that they will not distribute dividends, award bonuses or redeem own shares. What form the statement will take is currently being worked out in more detail.
The expert third party statement must, in any case, contain the following elements:
- A statement that it is likely that there are actual payment problems at the time the request for deferral is submitted or that these can be expected shortly thereafter. According to the Decree, ‘shortly’ refers to the period during which the corona measures apply to the particular business.
- A statement that it is likely that these payment problems were mainly caused by the corona crisis.
- A liquidity forecast that is plausible according to the expert third party. This forecast must have been prepared on the basis of the facts and circumstances known at the time the request for deferral of payment was submitted.
- If it is not in the State’s interest to grant a deferral (for example, due to the fear of abuse), the deferral of payment may be refused or withdrawn.
- Abovementioned deferral policy will, in principle, apply until October 1, 2020.
- Before the deferral is withdrawn or ends, businesses will be given the opportunity to agree a suitable payment arrangement with the Dutch tax authorities.
Business Income Tax
- If a provisional corporate income tax or personal income tax assessment has been imposed during the financial year and it appears that the taxable profit will be lower than the estimated profit used for the provisional assessment, a request for revision of the provisional assessment can be submitted. According to the Decree, any requests for reduction will be granted by the tax authorities. If a business has paid more tax than the amount due as a result of the granting of the request, the difference will be refunded.
- Basically, a loss incurred in the year 2020 can only be set off against the profit for 2019 after the corporate income tax return for 2020 has been filed; this can be filed not earlier than at the beginning of 2021. In connection with the corona crisis, the Government considers it desirable for businesses to have access to cash sooner. Therefore, by way of the granting of a specific approval in the Decree, the Deputy Minister of Finance has made it possible – subject to conditions – to set off, as a corona tax reserve, the expected loss for the year 2020 related to the corona crisis against the profit for the year 2019. Important conditions are that the corona tax reserve cannot amount to more than the taxable profit for 2019, without this reserve being taken into account, and that it must not exceed the expected total loss for 2020.
No default penalty for late payment of tax
Any payment default penalties imposed during the period March 12, 2020 through to the date on which the deferral of payment granted under the Decree ends, will be regarded as not having been imposed. If a payment default penalty is imposed, it will be canceled ex officio. Where necessary, this approval will also apply to excise duties and consumption tax on non-alcoholic drinks. According to the Decree, this measure was implemented with retroactive effect as of March 12, 2020.
No offsetting tax refunds and tax debt
In the Decree the Deputy Minister of Finance has approved that, during the period of the special deferral of payment, the tax collector may not credit tax refunds (of any type) against the tax debt for which a special deferral of payment was granted, unless a business requests this or the interests of the State are harmed.
Value Added Tax
- If the taxpayer’s customers are not able to pay their debts due to the coronavirus, then VAT paid in this regard can be reclaimed under certain conditions.
- VAT taxable persons that have to remit payroll tax and social security contributions while they are in a refund position for VAT purposes, can, under certain conditions, offset the payroll tax and social security contributions against the VAT refund.
- For businesses that are permanently in a refund position and which file quarterly returns, the refunds will be received earlier if monthly returns are filed. Upon request, the Dutch tax authorities will issue monthly returns instead of quarterly returns.
- Under conditions, temporally approval has been given for the outsourcing of healthcare workers to remain outside the scope of VAT and no VAT has to be paid on medical supplies (relief supplies and equipment) that are provided free to healthcare institutions, care facilities and general practitioners. Both measures have no consequences for the recovery of the provider’s/outsourcer’s input VAT. These measures will, in principle, apply until October 1, 2020.