The Netherlands will extend coronavirus tax relief measures for another three months as part of a €13 billion aid package mostly dedicated to subsidizing wages to keep people employed.
The new aid package, referred to as Emergency Package 2.0, was announced May 20 in a letter to parliament. The economic relief measures follow the country’s first emergency package of nearly €20 billion on March 17, which was set to expire by June 1.
Under the proposed bill, small and medium-size enterprises in the recreation field, such as catering, events, fairgrounds, stages, and theaters, would receive a tax-free allowance of up to €20,000 from the Ministry of Economic Affairs to pay fixed material costs. This payment would be available on top of wage subsidies from the Emergency Fund Bridging Employment (NOW) program.
Under the NOW program, businesses that can demonstrate a 20 percent drop in revenue compared with last year can apply for a wage cost subsidy of nearly 90 percent of wage costs plus about 30 percent of traditional expenses,” Remco Smorenburg, tax partner at Norton Rose Fulbright in Amsterdam, told Tax Notes.
The deadline for entrepreneurs to apply for deferred payments on income tax, corporate tax, payroll tax, and VAT has been extended to September 1, and the government will not assess late penalties. The new measures also extend the reduction of tax and recovery interest for all tax assets to 0.01 percent until October 1.
Other measures, like the temporary freeze for mortgage payments and relaxation of the hour criterion for self-employed people, will be extended to September 1.
The deferral of tax payments for businesses is intended to provide liquidity and is “quite effective,” said Francis Weyzig, tax program leader at the CPB Netherlands Bureau for Economic Policy Analysis. He said the deferral could represent between €2 billion to €5 billion per month in extra liquidity.
Businesses that have not yet applied for tax payment deferral are eligible to use it, Weyzig said, but businesses that have already received a three-month deferral must prove that they expect a “substantial decrease” in turnover and show that they are not paying out dividends or bonuses or buying back shares.
Smorenburg said the dividend provision comes from a strong push from the Netherlands to withhold state support from multinational companies that are doing well during the coronavirus crisis, like Booking.com. The government’s thinking, he said, is “as a business, if you’re applying for the subsidy, there’s also a moral obligation to only apply for the subsidies if you really, really need it and not making sure that you can still pay your shareholders.”
Self-employed individuals can receive additional income support for living expenses, which does not need to be repaid, from their municipalities through August. For continued income support, they may apply for a loan of up to €10,157 (at a reduced interest rate) if their company is bankrupt or has no moratorium, according to a May 20 government release.
Another tax measure kicking in this month allows companies subject to Dutch corporate income tax to deduct their expected losses in 2020 from their 2019 taxable profit to create a “corona reserve,” Weyzig said. Incorporated businesses that anticipate a lower return in 2020 can claim the carryback if they do have a loss next year, a move estimated to provide about €3 billion in liquidity, he said.
Looking ahead, Smorenburg said, it’s difficult to anticipate how big a role taxes will play in the Netherlands’ recovery. However, the government could reconsider its pledge to lower corporate income tax rates, he said, and seems poised to work on combating aggressive tax planning and avoidance, as outlined in the letter to parliament.
Another coronavirus aid package is likely to come on September 15, Prinsjesdag (Prince’s Day), the day the budget is considered, Smorenburg said.