Settling after the crisis - Phase 1

Personnel & HR

Conditions NOW-6

NOW-6 will be introduced in January 2022 up to March 2022. On 21 December 2021, in connection with the new COVID-19 measures, the compensation for the maximum wage bill for NOW-6 was increased to 90 per cent. Communication regarding the specific conditions of NOW-6 is expected on January 6. At this moment however, the conditions appear to be nearly the same as for NOW-5, being:

• Maximum loss of turnover: 90%
• Minimum loss of turnover: 20%
• Maximum compensation wage bill: 85%
• Wage bill exemption: 15%. 
• Flat-rate surcharge: 30%. 
• Maximum compensation per employee: twice the maximum daily wage.
• Wage bill reference: October 2021.

As of January  the (definition of) the wage bill, as used by UWV, has changed. In the wage bill more costs have been included as for example the holiday allowance. Therefore, the flat-rate surcharge has been put on 30%.

It was announced in earlier communication that the Cabinet is exploring the possibility of introducing an (annual) turnover loss threshold. In any case, the possible (annual) turnover loss threshold for the NOW will not be introduced for the NOW-6 in the first quarter of 2022.

Conditions NOW-5

NOW-5 has been introduced retrospectively and covers November and December 2021. NOW-5 has largely the same conditions as NOW-4. On 21 December 2021, in connection with the new measures, the maximum loss of turnover for NOW-5 was retroactively increased to 90 per cent. The allocation will be settled in the final subsidy determination.

• Maximum loss of turnover: 90%
• Minimum loss of turnover: 20%
• Wage bill exemption increases to: 15%.
• Flat-rate surcharge: 40%.
• Maximum compensation per employee: twice the maximum daily wage.

For NOW-5 the wage bill of September 2021 is the reference. Starting entrepreneurs who have started no later than 30 September 2021 can apply for NOW-5. Unlike the previous NOW schemes, in applying for NOW-5, employers can no longer choose over which months they wish to have the loss of turnover calculated. For each employer the loss of turnover is calculated over the months of November and December 2021.

Conditions NOW-4

NOW-4 covers the period July up to and including September 2021 and is the last period for which NOW can be applied for. The figures for NOW-4 are equal to the adjusted figures for the second and third period of NOW-3 (January to March 2021 and April to June 2021): 

• Maximum compensation wage bill: 85%.
• Minimum loss of turnover: 20%.
• Wage bill exemption: 10%.
• Flat-rate surcharge: 40%.
• Maximum compensation per employee: twice the maximum daily wage.

For NOW-4 a new reference month for the wage sum has been chosen, the month of February 2021, instead of June 2020. In addition, a turnover limit has been introduced whereby a turnover loss of up to 80 percent is used for the calculation. This means that if you have a loss of turnover of 80 to 100 percent, the calculation will be based on 80 percent. So this change means that a company with a turnover loss of 100 per cent will receive a subsidy for 68 per cent (80% x 85%) of its wage costs. For companies with a loss of turnover of 80 per cent or less, nothing changes due to the introduction of the turnover limit.

Conditions NOW-3

On 1 October 2020, the first period of NOW-3 started. The NOW-3 is divided into three subsidy periods of three months each. Similar conditions apply per subsidy period, see table below. Contrary to what was first established, the NOW-3 will not be phased out in later periods.

The application period for the second period of NOW-3 is from 15 February to 14 March 2021. The application period for the third period is from 17 May to 13 June 2021.

TVL subsidy no longer counts as turnover for NOW-3 , NOW-4 and NOW-5

The Government has chosen to exclude the TVL subsidy from the scope of the turnover for NOW-3, NOW-4 and NOW-5. Employers who have applied or are applying for NOW-3 , NOW-4 and NOW-5 will therefore no longer need to take account of the TVL subsidy received when determining their NOW subsidy.

We note that the TVL, as was applicable in the fourth quarter of 2021, has been extended for the period of January - March 2022. In addition, due to the acute lockdown on 19 December 2021, the TVL turnover loss threshold has been lowered from 30 to 20 per cent for the fourth quarter of 2021 only.

Reduction in working hours

On 30 August 2021, the Cabinet announced that the support package for jobs and the economy would end on 1 October 2021.Due to the termination of the NOW as of 1 October 2021, the Working Time Reduction regulation will come into force again as of that date. As a consequence, you will again be able to apply for a reduction of working hours for your employees. Despite the introduction of NOW-5, the Working time Reduction regulation (WTR) remains open. The WTR does not continue to apply to corona-related cases. An employer who faces other special circumstances may be eligible for both schemes. However, the unemployment benefit that an employer receives for the employee as a result of the WTR application will, in order to avoid undesirable double financing, be regarded as turnover for the NOW-5. In those cases, the employer's WTR application will therefore affect the amount of the NOW.

Processing the NOW applications

Following an application for a NOW advance to the UWV, you must submit a request for NOW to be determined after the subsidy period has ended. You can submit this request for the first NOW period from 7 October 2020 until 31 October 2021. Requests for the determination of NOW-2 can be submitted from 14 March 2021 until 31 March 2022. 

For NOW-3 the following applies. The application desk for the determination of NOW 3.1 (subsidy for October until December 2020) is open from 4 October 2021 until 22 February 2023. Applications for the determination of NOW 3.2 en NOW 3.3 (subsidy for January until March 2021 en April until June 2021) can be submitted from 31 January 2022 until 22 February  2023.

The following matters are important for the phase following an application for an advance:

• If it is clear that you no longer fulfil the requirements for the subsidy to be granted, for example if you do not - after all - experience the expected loss of turnover, you must report this as quickly as possible to the UWV.
• If your advance payment exceeds 100,000 euros, or the eventual subsidy amount exceeds 125,000 euros, your request must be accompanied by an auditor's report. The government will make an online tool available to estimate whether your subsidy is going to exceed 125,000 euros (if your advance was lower than 100,000). For this estimate it is, in any event, important that the advance amounts to eighty per cent and the eventual subsidy is reduced if the average wage bill in the subsidy period is lower than three times the wage bill of the so-called reference month).
• If no auditor's report is required, requests for NOW to be determined will be subject to random checks. With this in mind it is important that you keep accurate records of your turnover and wage bill.
• In the event of a request based on an advance which exceeds 20,000 euros, or if the NOW amount exceeds 25,000 euros, you must submit a statement from a third party which confirms the drop in turnover.
• If the final determination of NOW shows that an entrepreneur received too much advance on the subsidy, this amount must be repaid to the UWV. After the determination each entrepreneur is given a standard six weeks to repay the outstanding amount.
• Should this not be possible for any reason, an entrepreneur can make arrangements to repay in several instalments. The applicable interest rate is zero per cent and there is a concession that the UWV will be accommodating in this respect. The Cabinet has also decided to use an efficiency limit for repayments of NOW (and TVL), whereby amounts under 500 euro will not be collected.

Preparations for the 1.5 metre society

Employers are advised to start drawing up policy soon for a return to work (coronavirus protocol). Employers must inform their employees about this protocol and about the measures to prepare for the 1.5 metre economy in good time. The measures which companies have to implement differ per sector depending on the circumstances of the case.

Coronavirus protocol

The coronavirus protocol must, in any event, contain the following aspects:

• Based on your workforce you have to determine which employees are able to return to work (in phases) in a way which does not discriminate.
• You will have to adapt the working environment (such as desks and the canteen) in a way which complies with the 1.5 metre rule.
• You must observe the hygiene protocol of the National Institute for Public Health and the Environment (RIVM) and make employees aware of its existence. Disinfectants must be made available for use upon arrival and at workstations.

You can read more about the new way of working here.

International social security

During the COVID-19 crisis the social security authorities in most EU countries announced a more relaxed policy for international employees who live and work in the EU, the EEA or Switzerland. Their position will not change if they are required to work from home temporarily due to the coronavirus measures (see this PwC Tax News article) for more information.

It is important for employers that they properly monitor when these relaxed measures end and whether their employees can at that time actually travel to the locations they are expected to travel to.

Taxation of cross-border workers: mutual agreements with Belgium and Germany

The Netherlands has made agreements with Belgium and Germany about the taxation of cross-border workers who work in their country of residence due to the coronavirus measures. The mutual agreements with Belgium and Germany have been extended until 30 June 2022. The Netherlands has agreed with Belgium and Germany that this has been the final extension, meaning that the final end date of the agreements is 1 July 2022. On the basis of these agreements employees can, when drawing up their personal income tax return in the Netherlands and Belgium or Germany, choose (up to and including 30 June 2022) whether they wish to allocate the days they work from home to the tax levy of their usual country of work, or to their country of residence where they actually worked. In order to ensure that a sensible choice is made, it is advisable to assist your employees with this and make agreements with them about any tax advantage. See also under International/cross-border employment.

Remuneration and personal policy

The COVID-19 crisis is having an effect on pay packages. Depending on your type of company you must, for example, evaluate and amend the allocation of performance shares, participation plans and incentive payments. As regards the broader personnel policy, the question is where and how you want to start using your talented and key employees. A reorganisation of some kind may be necessary in order to create the required flexibility. As regards all these matters it is essential to draw up a communications strategy and plan for employees and other stakeholders. You can read more here about the effect of the crisis on Personnel & HR.

Pension

The possibility to suspend, on a short term, the payment of pension contributions depends on the agreed payment terms and on the collection policy of your pension provider. Many pension providers have responded to the call for leniency when entering into payment arrangements for acute liquidity problems. Read more about the general (statutory) preconditions for premium payment and premium arrears on Measures against the impact of the coronavirus. Here, you can also read more about possible options for a payment retention or unilateral changes to the pension agreement.

VAT & Customs

VAT

Interim reconciliation of annual accounts and the VAT returns

A review is needed, of all coronavirus-related cash flows received in 2020 and to be received in 2021 and 2022, to see whether these amounts might be subject to VAT and in which period of time. You must provide reasons to the tax authorities as to why these (new) incoming cash flows are not relevant for VAT and document this. You may have to account for incoming cash flows like these as turnover or expense allowances and as such you will have to analyse any differences with VAT turnover and costs. It is also advisable for you, as an entrepreneur required to pay VAT, to make an (interim) reconciliation between the annual accounts and the VAT returns.

Examples of VAT-relevant incoming cash flows

You will have to check whether incoming coronavirus cash flows are liable to VAT on a case-by-case basis. This means, for example:

• Direct subsidies (such as wage subsidies for employees and stock), gifts, sponsorship income.
• Advances to be repaid.
• Coronavirus-related support for research, specific infrastructure, the building and improvement of (test) facilities, production, digital applications and the hiring of external staff.
• Payments for the provision of care staff.
• Compensation, for example of contracting parties.
• Third-party claims paid out (for example payments for unlawful actions).
• Vouchers (for single or multiple use).
• Availability and continuity contributions (from the government aimed at, for example, public transport, care).
•  Voluntary consumer contributions.

Benefits or allowances rightly obtained under one or more of the following schemes are not taxed for VAT purposes according to the tax authorities. They also have no consequences for the possible deduction of input tax:

• The wage subsidy (NOW).
• Temporary bridging arrangement for flexible workers (TOFA).
• Compensation for Entrepreneurs in Affected Sectors (TOGS)
• Fixed costs allowance (TVL)
• Subsidy for fixed costs of MKB-companies
• Contribution to Sports Facilities Landlords COVID-19 (TVS).
• Temporary Support Scheme for Self-Employed Persons (Tozo)
• Temporary Support Necessary Costs (TONK).

Accounting VAT check in conjunction with special price discounts

In the case of special price discounts, as a consequence of the coronavirus crisis, it is also advisable, to carry out checks at bookkeeping level and to check the completeness, accuracy and timeliness of all positive and negative entries on the 'receivable and payable VAT' ledger accounts.

Working from home and business-to-private-use ratio

In connection with changed circumstances as regards the business-to-private-use ratio, the amount of VAT deduction or VAT adjustment may have been changed. This may have consequences for your (annual) VAT return. In the event of higher business use, you may receive a larger VAT refund.

Deduction of VAT input tax in the case of costs paid directly by a third party

If costs are reimbursed, this will be regarded as an incoming cash flow. However, it may also be the case that a third party pays costs directly, or that you pay another party's costs directly. In order to process and deduct VAT correctly, you must assess whether the VAT invoice is correct and has been issued to the right party. For the deduction of VAT, this is the purchaser/recipient that uses the costs for its taxed activities.

The conversion of supplier credit into a loan

When converting supplier credit into a loan, you must assess the VAT consequences. If a receivable from a purchase agreement (supplier credit) is converted into a receivable from a loan (novation), the original receivable will have, in fact, been paid. Often, the supplier will no longer be able to submit a request for a VAT refund if the loan is not repaid.

Termination of VAT payment deferment

You may be able to agree to a tailor-made solution with the tax authorities when you come to the end of the special deferment of tax payment scheme. You must weigh up the advantages and disadvantages.

Customs

Cash recovery

You may still be able to arrange a possible refund of customs duties, for example in conjunction with the retrospective lowering of import duties in connection with the coronavirus crisis.

Termination of payment deferment

You may be able to agree a tailor-made solution with the customs authorities when you come to the end of the special deferment of tax payment scheme. You must weigh up the advantages and disadvantages. Aa tailor-made solution is also important for your status as AEO (Authorized Economic Operator) that must, after all, meet solvency requirements in the EU.

Data analysis

Short-term emergency solutions in order to deal with problems relating to the flow of goods may have had an effect on customs parameters (such as origin, rate and value). Customs data needs to be analysed in order to determine whether everything has gone well and this may even create possibilities in the form of, for example, a refund of customs duties paid.

Profits tax

Profit and the redemption of vouchers

It may be that you cancelled events or meetings during one of the lockdowns and issued customers with vouchers as a form of compensation. When should you record these as profit? At the latest, they should be recorded as profit at the moment that the service is provided. Often this will be the moment at which the voucher is redeemed. Until that moment a liability will be recorded on the balance sheet for services still to be rendered. Depending on the conditions under which the vouchers are issued, this will take the form of a provision or a debt. The latter is relevant when determining the value of the liability in question.

Tax free: gift of four thousand euros and Fixed costs allowance (TVL)

The one-time gift of four thousand euros on the basis of the Compensation for Entrepreneurs in Affected Sectors (TOGS) and the Fixed costs allowance (TVL) of a maximum of 90,000 euros are free from corporate and personal income tax. This includes the stock subsidy for the closed retail trade as it is also provided through the TVL. Incidentally, the maximum TVL has been increased to 550,000 euro for Self-employed and SMEs (up to 250 employees) starting from the first quarter of 2021 and for non-SMEs (more than 250 employees) set at 600,000 euro. For non-SMEs, this ceiling was temporarily raised to EUR 1.2 million in the second quarter of 2021 and then lowered again to EUR 600,000. Consequently you do not have to include these amounts in your personal or corporate income tax returns. The government has announced that the One-off storage for stock and adaptation costs in the catering sector and the closed retail sector will also be exempt from personal and corporate income tax. The COVID-19 Fixed Charge Funding Grant Scheme will expire after the first quarter of 2022.

After the final NOW/TVL subsidy amount for the period to which it relates has been established, every entrepreneur is given a standard six-week term to repay any excess subsidy received. Should this not be possible for whatever reason, then an entrepreneur can make arrangements to repay the excess in several installments.

Personal income tax

Relaxation of hours criterion

As an independent entrepreneur, or as a participant in a general partnership (VOF) or a limited partnership (CV), you must fulfil the hours criterion to qualify for certain deductibles (such as the tax allowance for self-employed persons, the co-working partner's relief and the old-age reserve). This means that you spent at least 1,225 hours per calendar year on work for the business. However, for the 2020 personal income tax return you are allowed to include 24 hours per week for the period from 1 March 2020 up to and including 30 September 2020 even if, in reality, you did not spend that number of hours on work for your business. In the event of partial incapacity for work, an hours criterion of eight hundred hours will apply. The relaxation of hours criterion also applies to the year 2021. In the period from 1 January 2021 to 30 June 2021, 24 hours per week can be taken into account, just as in 2020 (and at least 16 hours per week for the starter's deduction in the event of incapacity for work). This will not be extended further; from 1 July 2021 onwards, only the hours actually worked will count towards the hours criterion.

Relaxation of hours criterion for seasonal workers

Seasonal workers for whom the peak in activities is normally during the period from 1 March up to and including 30 September are allowed to use the hours they worked in the same period in 2019 for 2020. For 2021, this scheme also applies to seasonal workers for whom the peak period falls between 1 January 2021 and 30 June 2021. For these workers, the same period in 2019 can be used as a comparative measure

Corporate income tax

Ban on the profit distribution in conjunction with NOW and deferment of payment

If a Dutch (group) entity has applied for the Temporary Emergency Bridging Measure to Preserve Employment (NOW) or an extended deferment of payment, restrictions apply with respect to the payment of dividends and/or bonuses and the purchase of the company shares

The effect of the restriction on repurchasing own shares, payments of dividends and bonuses for the NOW depends on the period for which NOW has been applied for. A broader restriction also applies if NOW is applied for by an independent operating company (based on the company's own loss of turnover instead of the loss of turnover at group level).

For purposes of the extended deferment of payment, the restrictions apply for the entire period as from the request for the deferment up to and including the (shareholders') meeting in 2021 during which the 2020 financial statements will be adopted. Furthermore, these restrictions only apply to the company requesting the deferment. In some cases these restrictions only apply if an auditor's report is required. Any violation of this ban in conjunction with, for example, the NOW scheme can result in the wage subsidy being set to zero and with that a refund of the wage subsidy received. All the decisions taken in relation to dividend and bonus payments over 2019 can, however, be implemented. See also: Informing stakeholders about government support under ‘Fase 1/General~.

Corona tax reserve 2019

Under certain conditions you are already allowed to deduct the expected loss during 2020 in 2019, insofar as that is related to the coronavirus crisis. This can be used to create a so-called corona tax reserve. This reserve must not amount to more than the 2019 profit. You are obliged to include the corona tax reserve in the profit of financial year 2020.

Fiscal provisions

When preparing the corporate income tax return for the 2020 financial year, you can include a provision based on the ordinary rules for calculating taxable profit (good business practice) for expenditure that is or will be incurred in 2021 or later years, but whose origin is in 2020. Under certain circumstances, expenses may be provided for e.g. a redundancy scheme in 2021, related to staff reductions due to the corona crisis, which have already been decided in 2020.

Also for the fiscal book years 2021 and 2022, it may be considered to what extent the provisioning of business decisions is permissible because of Covid-19.

Determining the loss of turnover for the NOW scheme

When determining the loss in your turnover, did you take account of the application of your (regular) transfer pricing policy and include the relevant intercompany turnover? In principle, the transfer price method ought to be consistent before, during and after the COVID-19 crisis/NOW period. If you are receiving a NOW subsidy, you should make sure that you take account of how this affects your transfer prices and with that the operational and fiscal result for the activities in question.