The Netherlands announces several financial measures in response to the COVID-19 outbreak
Following the outbreak of COVID-19, the government of the Netherlands has announced a number of measures providing financial and tax relief to businesses, freelancers and employees. The most notable measures are described below.
The Employment Bridge Emergency Fund (Noodfonds Overbrugging Werkgelegenheid; NOW)
- The NOW is a new, temporary measure that replaces the short-time work reduction permit (werktijdverkorting) and is intended to provide relief to businesses that may struggle to pay the wages of their employees during the COVID-19 outbreak. Requests filed by businesses for a short-time work reduction permit in the past few days will be automatically transposed and dealt with under the new NOW but additional information may need to be provided by such businesses as the new measures are based on turnover rather than employment productivity.
- Under the NOW, employers can apply for a substantial contribution towards their labour costs of up to 90% (the actual amount covered depends on the loss of turnover suffered by the relevant employer). An audit report will be required for “large” applications (still to be defined).
- The employer must expect a loss of turnover of at least 20% from 1 March 2020 to be eligible for the NOW. Also, the employer must still pay 100% of the salaries (i.e., must pay the remaining 10%) and must commit not to make any redundancies based on economic circumstances.
- The NOW can be applied for through the Dutch labour authorities (UWV). On the basis of the request filed, the UWV will provide an advance of 80% of the requested contribution. The actual amount that is available to the business on the basis of the loss of turnover suffered is determined at a later stage.
- The scheme covers employees on permanent and flexible contracts, as well as temporary workers, and ensures that their wages are paid in full without such employees ‘consuming’ any unemployment rights (WW-rechten) they have built up.
- The NOW can in any event be applied for three months, with a possible extension of another three months (the latter which may be subject to revised conditions).
Tax payment deferral
- Businesses can request extraordinary deferral to pay the amount of (preliminary) (corporate) income taxes, payroll taxes and VAT, which are typically due on a monthly basis. The option to request deferral applies to initial (voorlopige) tax assessments, normal tax assessments, additional tax assessments (navorderingsaanslagen) and self-assessment taxes such as VAT and payroll taxes.
- In order to obtain an extension, businesses will have to file a written request (in Dutch) with the Dutch Tax Authorities (DTA). The request should set out the tax(es) for which the business is requesting an extension. The State Secretary has indicated that it is no longer required to specify in the request how COVID-19 has caused financial problems for the business, unless a business would like to obtain deferral for longer than three months.
- Furthermore, businesses are also no longer required to attach a statement from a third party expert to their request in which the expert confirms the inability to pay and its causes.
- The DTA will immediately grant the extension upon receipt of the request, but have indicated that a true substantive assessment of the actual payment problems suffered by the business will follow at a later stage.
- The normal 4%-rate of interest applied by the DTA in case of a late filing of the tax return (belastingrente) as well as any interest on overdue tax (navorderingsrente) will be lowered to approx. 0% (0.01%, as apparently the systems require an amount of interest to be charged).
Reduction of provisional tax assessments
- Businesses usually receive a provisional (corporate) income tax assessment from the DTA at the start of the fiscal year. The DTA base this provisional assessment on the tax returns filed in previous years. Businesses that have received provisional tax assessments but that are now expecting to generate lower profits due to the COVID-19 outbreak can apply for a lower provisional assessment through the DTA’s online portal.
- Such request is normally not checked at all, as it only lowers the preliminary assessment, and not the amount of tax that is ultimately due. If more tax has to be paid on the final assessment, this is under normal circumstances subject the 4% interest charge (as mentioned above), so that there is typically no benefit in applying for unrealistic reductions of preliminary assessments. So long as the interest rate stays at effectively 0%, however, it may be beneficial to apply for a reduction.
- As soon as taxpayers become aware that the tax over the year concerned is likely to be higher than what follows from the (original or reduced) preliminary assessment(s), they have to inform the DTA accordingly.
Extension of the SME credit guarantee scheme (Garantie Ondernemersfinanciering; GO)
- The GO was available prior to the outbreak of COVID-19, but the government has increased the GO’s ceiling from Euro 400 million to Euro 1.5 billion in total. The GO is available to businesses that now suddenly experience problems in obtaining bank loans and bank guarantees.
- Under the GO, the government provides a 50% guarantee on ‘fresh money’ bank loans and/or bank guarantees provided to Dutch businesses (i.e. the financing must increase the bank’s position as a creditor, and existing facilities and/or the replacement thereof are in principle not eligible, subject to exceptional situations). The minimum and maximum guarantees per business are Euro 1.5 million and 150 million, respectively.
- In order to be eligible for the GO, a business must have its registered office and the majority of its commercial activities in the Netherlands. A business must also have reasonable profitability and continuity prospects, and no ‘excessive’ capital withdrawals may have occurred in the preceding year.
- The GO can be applied for on the website of the Netherlands Enterprise Agency.
Possibility to postpone payment of pension contributions for employers
- The Labor Foundation (Stichting van de Arbeid), the Pension Federation (Pensioenfederatie) and the Dutch Association of Insurers (het Verbond van Verzekeraars) have agreed to assist entrepreneurs who are facing difficulties as result of the outbreak of COVID-19.
- The offered assistance will be tailored to the specific problems faced by each sector or employer and may take one of the following forms:
- Pension providers may agree to a payment arrangement with individual employers who are facing acute money problems. In that case, the individual employer should report to the pension fund, the insurer or the premium pension institution.
- The payment terms within which employers must pay pension contributions will be extended - within the legal possibilities - for affected sectors and employers.
- Pension providers may opt for a less strict recovery policy when collecting pension contributions. They can do this, for example, by postponing the involvement of debt collection agencies and / or by postponing the imposition of administrative fines in the affected sectors.
- The scope for providing tailored solutions is currently limited by existing legal regulations concerning collection efforts and payment terms. Consultations on this will be held in the near future between the Dutch Association of Insurers, the Pension Federation, the Dutch Central Bank (De Nederlandsche Bank) and the Ministry of Social Affairs and Employment.
- The Labor Foundation, the Pension Federation and the Dutch Association of Insurers, in consultation with the Cabinet, are urging for the measures concerning pension contributions to be adequately included in the NOW.
Should you require further information in relation to any of the above and/or would like assistance in requesting any of these reliefs, please contact the undersigned.