Coronacrisis: the Dutch government opts for advice and financial support
The Dutch government has adopted a strategy of herd immunity to slow down the spread of the coronavirus. The government is thus not trying to stop the coronavirus, but control the number of infections so an increasingly larger group of people becomes immune to the virus. This approach has also determined the economic strategy of the Dutch government, which it says will be subject to constant revision. As a result, laws and regulations are also constantly changing. ABAB Accountants and Consultants is keeping a close eye on these developments and the most recent information can be found on our website. This article describes the Dutch government's policy at this moment in time.
The Netherlands recommends hygiene measures
The Dutch government has decided to focus on advising people about hygiene-related measures. It recommends regularly washing your hands, sneezing into your elbow, staying a metre and a half from one another, not shaking hands, working from home wherever possible and avoiding contact with other people.
The Netherlands has not prohibited people from going outdoors and the country's borders are still open for international transport. And while the Dutch government has discouraged travel, people are free to decide whether they want to follow the government's advice.
Business travel has also not been forbidden and companies cannot prevent people from travelling to certain areas within the Netherlands and abroad. On the other hand, companies can also not force people to travel to high-risk areas.
Supermarkets and hospitals remain open. Shops are also open for the time being. However, in practice, some retailers have closed their shops in order to protect their personnel and customers.
But schools, nurseries, hospitality establishments, churches and sports clubs have been closed. And concerts and other events have also all been cancelled.
Dutch government offers financial support to entrepreneurs
The corona crisis has immediately resulted in a major drop in turnover for many businesses. The Prime Minister of the Netherlands, Mark Rutte, has thus said that financial support will be provided to businesses that need it. The Dutch government will continue to support the country using the financial resources at its disposal.
Financial support measures announced by the Dutch government for entrepreneurs
At this moment in time, the Dutch government wants to offer support in two ways. Firstly, by offering immediate access to credit. Secondly, by deferring tax payments and reducing the interest on these payments.
Support by offering access to credit
Dutch government more likely to offer loan guarantee for businesses
By offering more loan guarantees, the Dutch government has made it easier for businesses to obtain loans from credit institutions. At this moment in time, the government-guaranteed loan represents 50% of the credit provided by financiers. The government's guarantee amounts to 90% of such government-guaranteed loans. Now that the measure has been revised, the government-guaranteed loan will be increased from 50% to 75%. This arrangement will also apply to bridge loans and bank overdrafts, and will run for a maximum of two years.
Temporary arrangement for self-employed people
The strict conditions in the Assistance for self-employed persons Decree (Bbz) have also been relaxed. This means self-employed people will be able to quickly and easily request extra assistance for living costs and/or a loan for operating capital. This arrangement will last for at least three months and certain conditions must be met before assistance is approved. For instance, the business must be a viable going concern.
Contribution to salary costs of employers
Employers can now request UWV (Employee Insurance Agency) to contribute to their salary costs. They can then use this advance payment to continue paying employees that have fixed and flexible contracts. Employers are entitled to apply for this allowance for a period of three months. There is also an option of extending this period by another three months. The exact amount of this allowance will be determined by the employer's decrease in turnover. The reference date for determining turnover decreases is 1 March 2020.
The Dutch government is still deciding how this arrangement will be implemented in practice and it is not yet possible to submit applications.
The Dutch government is establishing an Emergency helpdesk for sectors that have been hard hit by the new social restrictions. This Emergency helpdesk is aimed at quickly helping affected SME's.
In the Netherlands, this includes hospitality establishments, the travel sector and beauty salons. Businesses in these sectors can receive a one-off allowance of maximum € 4,000 from the Dutch government.
The conditions for being able to access this Emergency helpdesk are still being drawn up.
Support by deferring tax payments and reducing interest rate
The Dutch government is also supporting Dutch companies when it comes to fiscality.
Reduction in provisional assessments for corporation tax and income tax
Companies can expect the corona crisis to have a negative impact on their profits. But they can mitigate this loss of liquidity by submitting a request to decrease imposed provisional assessments for corporation tax and/or income tax. Businesses will thus immediately pay less tax.
Faster recuperation of already paid corporation tax
Companies are able to request provisional loss relief. However, they must have made losses by the end of financial year 2020. The Dutch Tax and Customs Administration will then already set off part (80%) of the (estimated) profits against the assessment for 2019. This means it will be faster for companies to recuperate any overpaid corporation tax.
Option to defer payment of owed taxes
Companies can request deferral of payment from the Dutch Tax and Customs Administration if they can demonstrate that they have encountered difficulties because of the coronavirus outbreak. Such deferral of payment is possible for outstanding income-, payroll-, corporation- and turnover taxes.
Reduction in late payment interest on tax debts
To make it easier for companies to request deferral of payment, the Dutch Tax and Customs Administration will be temporarily reducing late payment interest from 8% (corporate income tax) 4% (all other taxes) to 0.01% as of 23 March 2020. From this moment on, this reduced rate will apply to all tax debts.
Reduction in tax interest
The Dutch government charges tax interest if tax returns are not submitted on time. Once it becomes technically possible, the Dutch government will be reducing this rate to 0.01%. As far as income tax is concerned, the tax interest rate will decrease as of 1 July 2020; rates for all other taxes will be reduced on 1 June 2020. The tax interest rate on corporation tax is currently 8%; this is 4% for all other taxes.
Default penalties will not be imposed in the coming period
In the coming period, the Dutch Tax and Customs Administration will not be imposing, or will be reversing, default penalties for failing to pay taxes.
Municipalities and Dutch government consider stopping tourist tax
At this moment in time, municipalities charge tourist tax to companies in the accommodation sector. The Dutch government is consulting municipalities about the option of temporarily stopping such tourist tax.
Which actions can entrepreneurs take themselves?
During the corona crisis, it will be important for companies to identify all crisis-related consequences they encounter - this also applies to fiscal consequences. This includes consequences for payroll tax, income tax and social security contributions when employees work from home, but also consequences for VAT tax returns and consequence for transfer pricing policy.
Monitor consequences for global mobility
Due to the outbreak of the coronavirus, employees are more likely to work from home, which can have consequences for taxes paid on the salaries of employees. For example, if employees are fiscal residents of a country other than the country where the employer is located. In this case, the country where the employee lives will be entitled to levy taxes on part of the employee's salary if she/he performs activities for the employer in the concerned country.
By working from home, employees may become subject to the social security system of another country. For instance, employees that continuously work in different countries within the European Economic Community (EEC) are only insured in one country. This will be their country of residence if that is where they perform a substantial part (25%) of their work-related activities within a twelve-month period. If employees spend more time working from home, they could fall under the social security system of their country of residence rather than the country where their employer is located.
If an employee's salary is divided within the payroll system, whereby it is partly taxed in the Netherlands and partly in another country, it is important to duly assess whether this ‘salary split percentage’ is in keeping with the actual situation. This will help to avoid major (sudden and unexpected) corrections in the salaries of employees.
Duly monitor consequences for VAT
Previously established agreements may be cancelled and/or contracts may be terminated due to the coronavirus outbreak. This could happen if the agreed performance has not yet started, is ongoing or has already been completed. For example, when events are cancelled due to the outbreak of the coronavirus.
These contracts may stipulate that certain compensation must be paid to the counter party if the agreement is modified and/or terminated. In principle, VAT need not be charged on paid compensation. However, this is not always the case, like when payments are termination fees rather than simple compensation. Businesses must also consider VAT-related consequences for all advance payments if agreements are terminated.
In most cases, all paid amounts are reimbursed when transactions are cancelled. However, it may be necessary to send revised invoices to the concerned clients. This will also have consequences for already paid VAT, which can be recuperated under certain conditions.
The cancellation of staff events could also have a positive impact on VAT. For instance, if staff-related costs have already been incurred before an event is cancelled; like the purchase of food and drinks. In this case, there may not be a restriction on deducting input tax on personnel expenses.
Monitor whether corona crisis has an impact on transfer pricing
Group entities that perform routine activities in the value chain normally report relatively stable profits. This profit is in keeping with the performed functions, encountered risks and used assets. Surplus profits are paid to group entities that perform an entrepreneurial function and encounter significant risks.
A significant decrease in productivity, due to the corona crisis, could result in losses. This also applies to group entities that perform routine functions. It is important to examine to which group entities these losses are allocated. The means of allocation will be determined by contractual conditions and how transfer pricing policy is implemented between group entities within multi-national groups.
In the coming period, it would be wise for companies to make interim analyses of, and clearly document, the impact of the coronavirus pandemic on profit appropriation within their multi-national group. Transfer pricing corrections may be necessary in order to ensure professional profit appropriation. This will help to avoid disputes with the Dutch Tax and Customs Administration and local tax authorities with regards to this issue.
Finally, cash flow management could help to increase group financing. In this case, it is important for group financing to be based on professional conditions which have been confirmed in writing.
Businesses with insourced personnel: be aware of recipient's liability
If companies in the Netherlands rely on insourced personnel, like flex workers, it is important for them be aware of their recipient's liability during the corona crisis.
Companies that insource personnel, like employment agencies, could encounter financial problems due to the corona crisis. As a result, they may not be able to pay taxes and social security contributions that are owed in the Netherlands. The Dutch Tax and Customs Administration can hold such insourcing companies liable for the taxes and contributions they owe.
Naturally, this liability can only be imposed once certain conditions have been met. For example, the Dutch Tax and Customs Administration must have first exercised all means to recuperate debts from the outsourcing company. Insourcing companies can then only be held liable for outstanding taxes that can be attributed to the personnel they have insourced.
It is important for companies that use insourced personnel to gain an effective insight into this risk of recipient's liability and to restrict it wherever possible.
Like to know more?
To remain up-to-date with ever-changing policy in the Netherlands, please keep an eye on our website or feel free to contact Clea Cremers, senior tax advisor, by phone +31 (0)77-3217715 or send Clea an email.