UPDATE 14 May 2020:
On 6 May 2020, the Dutch State Secretary of Finance published a third policy decree in which the COVID-19 crisis measures are further implemented by means of a number of specific authorizations. In addition, this so-called Decree crisis measures corona crisis ("Decree") now contains a number of new supplementary authorizations not previously set forth by the Dutch government in its previous decrees. The Decree entered into force on 9 may 2020 and, in principle, applies with retroactive effect as of 12 March 2020. This Decree is an addition to the second policy decree, which was published on 22 April 2020. The new measures from both new Decrees are set out below.
On 28 April 2020, by means of a news release, the Dutch Ministry of Economic Affairs and Climate Policy has provided (further) information about the Compensation for Entrepreneurs in Affected Sectors by COVID-19 (in Dutch: Tegemoetkoming Ondernemers Getroffen Sectoren COVID-19, “TOGS”) measure.
To protect employment, the Dutch Minister of Social Affairs and Employment has amended the group provision in the so-called crisis measure for the retention of work (noodmaatregel overbrugging voor werkbehoud, NOW) on 22 April 2020.
New measures published in the Decree of 6 May 2020
The measures are still being worked out in detail. Measures that require a legislative basis will as much as possible be included in the 2021 Tax Plan as a separate bill. In anticipation hereof, the measures will, where necessary, be elaborated on in a policy decree granting approvals. Measures that do not require a legislative basis will also be elaborated on in a policy decree as soon as possible.
A reduction of the minimum wage of Dutch directors with a substantial interest (gebruikelijk loon)
Normally directors and substantial interest (≥5% shareholdings) shareholders must always pay tax on an appropriate wage as determined in legislation, the so-called ‘normative wage’. In light of the large loss of revenue that is being incurred in some sectors due to the corona crisis, the Dutch government is allowing director and substantial interest holders to assume a lower normative wage in 2020 that is in proportion to the decline in revenue due to the corona crisis.
Measure for self-employed professionals: relaxation of ‘hours requirement’ (urencriterium)
Self-employed professionals are entitled to certain types of allowances, such as the self-employed persons’ deduction, if they meet the so-called ‘hours requirement’. The hours requirement, requires self-employed professionals to spend at least 1,225 hours per year on their business. To prevent self-employed professionals losing their entitlement to these allowances, as a result of the corona crisis, the Dutch authorities will – during the period 1 March 2020 through 31 May 2020 – assume that these self-employed professionals spent at least 24 hours per week on their business.
Work-related cost rules (werkkostenregeling)
By means of the work-related costs rules, employers can provide employees with tax free reimbursements and provisions up to a certain percentage of the total payroll expenses. The maximum amount that an employer has available for these untaxed reimbursements will be increased in 2020 from 1.7% to 3% for the first EUR 400,000 of the total payroll expenses (and remains 1.2% for payroll expenses in excess of EUR 400,000).
Dutch corporate income tax provision for COVID-19 in the 2019 accounts
Taxpayers that are subject to Dutch corporate income tax are allowed to set-off (part of) their expected 2020 corona related loss with their 2019 taxable profits (by creating a provision in the 2019 accounts and Dutch corporate income tax return). This may result in a lower 2019 taxable profit, and thus a lower 2019 Dutch corporate income tax due.
Postponement of effective date of the bill on excessive lending as a director and substantial interest shareholder (excessief lenen van de eigen vennootschap)
In September 2018, the Dutch government announced the bill on the Excessive lending from the own company Act, which is intended to take effect as of 2022. In short, this bill makes it possible to tax debts in excess of EUR 500,000 that director and substantial interest (≥5%) shareholders owe to their own companies. In order to accommodate director and substantial interest shareholders, the government wants to postpone the effective date of this bill by one year, thus until 1 January 2023. This means that director and substantial interest shareholders will have until 31 December 2023 (first reference date) to repay these (excessive) debts. This change will be included in the bill that will shortly be sent to the Lower House of Parliament.
Mortgage payment hiatus (uitstel hypotheekbetalingen)
In the Netherlands, individuals can deduct their mortgage interest paid on a loan that is taken up for the acquisition of their own home.
For mortgages for home owners taken out on or after 1 January 2013, a mortgage interest deduction can, in principle, only be claimed in the Dutch Personal Income Tax Act 2001, if that mortgage is repaid in a maximum of 360 months under at least an annuity repayment schedule.
If this repayment schedule is not complied with - for instance due to the corona crisis, an individual is allowed (by his/her bank) to postpone repayment of his/her mortgage for several months - the paid mortgage interest in 2020 would no longer be tax deductible for this individual. Based on this Decree, the paid mortgage interest will nevertheless be tax deductible for this individual once certain requirements are met.
New measures published in the second policy Decree (22 April 2020)
On 22 April 2020, the Dutch State Secretary of Finance has published a second Decree, in which the corona crisis measures are further implemented by means of a number of specific authorizations.
The measures in this second Decree concern – among others – the following subjects:
Set forth below are some of the above subjects.
Frontier workers (grensarbeiders)
Relaxation of administrative burdens and the so-called travel allowance in the wage tax
Reduction of collection interest (verlaging invorderingsrente)
Decrease provisional 2020 tax assessment
Compensation for Entrepreneurs in Affected Sectors by COVID-19 (in Dutch: Tegemoetkoming Ondernemers Getroffen Sectoren COVID-19, “TOGS”) is exempt from taxation
As set out above, the TOGS measure concerns a one-off lump sum payment of EUR 4,000, applies per legal entity and not per business unit and is not subject to taxation.
NOW measure (for Dutch companies within a group)
As set out in the introduction, to protect employment, the NOW measure has been amended on 22 April 2020. For more information on the NOW measures taken in the past we refer to our previous alerts.
Briefly put, the NOW measure aims to provide employers who are confronted with (i) a decrease in revenue of at least 20%, for (ii) a consecutive period of three calendar months and (iii) in the period from 1 March to 31 July 2020, under certain conditions, with financial compensation (provided that the employees remain employed).
With respect to the first condition, the NOW measure has been amended insofar that a company that has lost more than 20% of its revenue due to the corona crisis, but that belongs to a group of companies that does not meet this condition, may still apply for the NOW measure. However, such a company (“Company”) should meet several conditions, which shall be set forth hereunder.
Should you have any questions on how these relief measures in response to the corona virus will affect your business, please do not hesitate to contact us.
Richard Smeding – firstname.lastname@example.org
Gerwin de Wilde – email@example.com
14 May 2020