Dutch finance and tax measures regarding COVID-19
The outbreak of Covid-19 has major consequences for the global economy. The Dutch Ministry of Finance has announced that measures will be introduced to limit its impact on the Dutch economy. In the following paragraphs we outline these measures and propose ways in which you can limit the negative financial effects for your organisation. New additional measures are expected shortly, we will update you as soon as these are announced.
1. Measures announced by the Dutch government
1.1. Special deferral of tax payments
Business owners that have or expect financial problems due to the outbreak of Covid-19 can get a special deferral of payment by the tax authorities. This is the case for personal income tax, corporate income tax, VAT and payroll taxes. Once the tax authorities receive the request for a special deferral in payment, the requirements to pay tax will be suspended. The individual assessment will later take place. Moreover the tax authorities will omit or reverse standard penalties that are not on time paid.
We are happy to make a request for special delay in payment for you. In order to do that we do need to be able to declare that:
- Currently you have trouble with making payments but that for example no future payment problems are expected.
- Your trouble with payments is only temporarily due to the corona virus.
- Your company is otherwise viable.
1.2 Reduction of working hours
Declining revenue can have a negative impact on the results, more so when employees’ wages are fully paid without them being able to work. Reducing their working hours can be a solution for this. You pay your employees the same salary, while they can actually only work fewer hours. Due to this difference a claim can be made for an unemployment-payment (WW) due to reduced working hours (so called: WTV). The UWV reimburses 70% of the salary for the hours that the employees did not work. A WTV-payment is valid for a minimum of 2 weeks and can be extended to a maximum of 24 weeks. You have to satisfy the following requirements:
- Your company is affected by a special situation that is not covered by the regular business risk.
- You expect for a coming period of at least 2 till 24 weeks to have at least 20% less work.
An exemption is granted from the date when a request for reduced hours is submitted. The permission is valid for a maximum of 6 weeks. A permission is not provided:
- In any period of time before the submission of request for exemption is received by the ministry.
- When the number of employees does not match the reasonable need of the company.
- If the reduction of work relates to a strike.
1.3 Bridging loan
The government has announced that the introduction of the extended regulation for a guarantee for medium and small companies (so called: MBKB) will be accelerated for companies that have liquidity problems due to the outbreak of the Covid-19. The regulation is up and running from Monday 16th of March 2020 and is part of a set of measures that has been earlier announced by the government to accommodate the economical consequences of the coronavirus.
In order for business owners to easily borrow money, the Ministry of Economics and Climate is a guarantor through the BMKB. Business owners can get loans from lenders such as banks. In the regular regulation the guarantee loan (borgstellingskrediet) is 50% of the loan that the lender provides, which is often a bank. The guarantee of the government is 90% of this guarantee loan.
Due to the additional measures, the guarantee loan of the BMKB is increased from 50% to 75%. Therefore banks can expand loans more easily and faster and companies can borrow more money earlier. Also the regulation can even further be expanded and is applicable for bridging loans and bank overdrafts with a duration of 2 years.
2. Measures that you take yourself
The following measures are examples of possible opportunities that tax regulations offer to enhance the liquidity of your organisation.
2.1 Reduce preliminary corporate income tax assessments
It is possible that your organisation has received a preliminary corporate income tax assessment for the financial year of 2020. This preliminary assessment is based on the results of previous financial years. However, it is possible that due to recent developments the results are no longer correct. By reducing preliminary tax assessments you can maintain liquidity in your company.
2.2 Reconsider the VAT return period
At the start of each quarter you or someone in your company files for the VAT return. However some exceptions to this rule do exist. You can request to file for your VAT return monthly. This can be beneficial if you are in a position of structural VAT refund. Filing for tax return quarterly is usually recommended when you are in a VAT paying position. We can adjust the period for filing VAT returns for you.
2.3 Invoice date near the end of the VAT filing return period
If an invoice is sent on the last day of the period, it is still necessary to pay VAT over that period. Generally the tax authorities do not make a difference between paid and unpaid invoices. If you sent an invoice on the first day of the next period, then the corresponding amount of tax should be paid over the end of that period. It is then more likely for the bill to be paid before the tax needs to be paid. Vice versa the same result can be achieved by receiving purchase invoices before the new period so that the incurred VAT can still be refunded in the current period. In order to do this your supplier needs to of course cooperate.
2.4 Claim VAT on unpaid invoices
As a creditor you have at the latest, one year after your claim becomes due and payable, the right to receive a reimbursement of the VAT paid. In other words, if you have you sent invoices longer than 12 months ago and they are not paid yet, then you can receive a refund on the VAT paid in the next tax return period. Please be aware that if your supposedly non-collectable account receivable is paid at a later moment, you will have to pay the VAT amount again. If it becomes clear that the client will not be able to pay the invoice (for example due to bankruptcy) within the 12 months after the payment period, then the tax refund can be filed earlier.
2.5 Determine tax unit for VAT
Claiming a fiscal unity for VAT purposes can be beneficial. Companies which are a part of a fiscal unity for VAT purposes are exempted from VAT for mutual supply of goods and services. Therefore no VAT has to be paid on mutual transactions, which would be refunded later by the tax authorities without a fiscal unity. This can be additionally valuable if a part of the tax unit performs VAT exempted activities. Please be aware that forming a fiscal unity automatically implies that all companies within the fiscal unity become jointly and severally liable for each other’s VAT debts.
2.6 Selling accounts receivable
If you expect to not be able to collect your accounts receivable, due to the current economical situation, they can still be of value and a cash flow can be generated. This is possible by selling these claims to market participants that are specialised in purchasing receivables under nominal value. These market participants pay you a certain percentage of the nominal value of your receivable, depending on the quality. An advantage for you is that your cash flow immediately improves and you limit your risk on any possible future losses
2.7 Cash flow forecast
Your organisation could suffer from an acute stop in demand, which could lead to acute liquidity problems. For example, the next salary payments could be a problem. How to finance these payments? Cash is king in every crisis. A reliable cash flow forecast can be of great value for your organisation. If you need assistance with setting up reliable cash flow forecasts, we will gladly do so. We are experienced with online cash flow tools which connect directly to your administration. Do not hesitate to contact us for this service.
In case you have any questions about the aforementioned information, we are of course prepared to elaborate on certain topics. Moreover, we are more than happy to assist you in taking the best possible action to restrict the negative consequences the outbreak of Covid-19 can have on your organisation.