News Update Tax
20 March 2020
The Dutch government has announced several tax-related measures to support companies affected by the coronavirus (COVID-19). Most measures apply for at least the next three months. In this News Update, we will outline the main tax-related measures. In addition, we will discuss some tax issues that companies can, or even must, take into account in these uncertain economic times. We conclude this News Update by explaining a number of opportunities for your company to limit the financial impact.
Tax-related measuresRelaxation of deferral of payment
Companies that have run into financial problems due to the coronavirus can obtain deferral of payment of income tax, corporate income tax, wage tax and/or value added tax more easily. For example, companies do not have to include the required 'third-party expert statement', showing that the coronavirus has caused the financial problems, at the same time as making the request. The request will be assessed later on. The Dutch tax authorities will postpone collecting payment immediately after receipt of the request.
No default penalties and reduction of collection interest and interest for unpaid tax
In the coming period, the tax authorities will not impose default penalties for non-payment or late payment of taxes. Previously imposed default penalties will be reversed. The collection interest that normally starts after the expiry of the payment term will be temporarily reduced from 4% to 0.01% from 23 March 2020. This applies to all tax debts. In addition, the interest rate for unpaid tax will also be reduced to 0.01% as of 1 June 2020. An exception to this is the temporary reduction of the rate for unpaid income tax, which will take effect from 1 July 2020. The current rate for unpaid corporate income tax is 8% and 4% for all other taxes.
Reduction of preliminary corporate income tax assessment
If a preliminary corporate tax assessment has been imposed and the taxable profit is likely to be lower than the taxable profit estimated for the preliminary assessment, a reduction of the preliminary assessment may be requested. This creates a right to a refund (if the preliminary assessment has already been paid in full) or provides for a reduction of the monthly tax due (if the preliminary assessment is paid on a monthly basis). The coronavirus may give rise to an opportunity to take a critical look at imposed preliminary assessments. The Dutch government has announced that the Dutch tax authorities will grant all requests to reduce preliminary assessments.
Points to considerTax liability for subcontractors and hired staff from employment agencies
If your company outsources work to subcontractors or hires staff from employment agencies, your company may, under certain circumstances, be held liable for payroll taxes, premiums and VAT that remain unpaid by the subcontractors or employment agencies. There are several options for limiting this liability. As subcontractors and employment agencies may not be able to pay their taxes and premiums due to the current circumstances, it is now especially important to pay only on a G-account and to verify that your company has met all conditions for limiting liability, such as keeping track of the persons who have been hired and during which periods.
Notification of inability to pay taxes
Despite the fact that the Dutch tax authorities will grant a deferral of payment of tax and no default penalties will be imposed for failing to pay taxes on time or in the near future, the regular rules regarding the required notification of inability to pay taxes apply in full. If your company is no longer able to pay taxes or premiums, this must be reported immediately (but at the latest within two weeks after the taxes or premiums should have been paid) to the Dutch tax authorities. This prevents the directors of your company from being automatically personally liable for unpaid taxes and premiums.
OpportunitiesOptimising the loss settlement position
Both in good and bad economic times, there are various options for optimising the loss settlement position of your company. The coronavirus may give rise to an increase in the provision for bad debts. In addition, other provisions on your fiscal balance sheet may also be formed or increased, or assets may be written down. If this results in a loss, this loss can be set off against the taxable profit of the previous financial year. In principle, this is only possible after the final assessment has been determined. However, if the corporate income tax return is filed immediately after the end of the financial year and a request is made to impose a preliminary loss assessment, the vast majority (80%) of the preliminary loss assessment can be set off immediately, before determining the final assessment, with the taxable profit from the previous financial year. This can provide a significant liquidity benefit.
We also recommend analysing whether the loss settlement position can be further optimised by establishing or expanding a fiscal unity for corporate income tax purposes, or by deconsolidating one or more companies from such a fiscal unity. A request to establish or expand a fiscal unity can be made with retroactive effect of up to three months. Requests to deconsolidate one or more companies from a fiscal unity have no retroactive effect.
Finally, under the current circumstances it may also be possible to invoke the hardship clause (hardheidsclausule) if a tax loss from the current financial year cannot be set off against profits from previous financial years that fall just outside the current loss settlement period of one year. It should be noted that this is not a straightforward possibility, but an appeal to the hardship clause can be considered if the interests are high.
Reclaim VAT on unpaid invoices and adjust invoice date
In principle, paid VAT can be reclaimed no later than twelve months after an invoice has been left unpaid by a customer. However, if it is clear that a customer will not pay the invoice in full at an earlier stage, the VAT can be reclaimed earlier. We therefore recommend checking whether your customers will be able to pay all your invoices in full.
In addition, you can consider adjusting the date on which you issue your invoices. If an invoice is issued on the last day of a VAT period, the VAT must be paid to the tax authorities one month after the end of that VAT period. If the invoice is issued on the first day of the new VAT period, the VAT must only be paid one month after the end of that new VAT period. Adjusting your invoice date can therefore also provide you with a liquidity advantage.
Fiscal unity for VAT purposes
We recommend analysing whether your position can be further optimised by, where possible, establishing or expanding a fiscal unity for VAT purposes, or by deconsolidating one or more companies from such a fiscal unity.
In addition to the above options, there are other suitable solutions and opportunities for every company. We are happy to help you analyse these further.