COVID-19 legislative measures taken by the Netherlands
In response to the COVID-19 outbreak, the Dutch government has introduced a myriad of measures over the past few weeks to mitigate the adverse impact of COVID-19 for businesses and people. The measures focus on: supporting businesses and employment, providing liquidity/financing support to businesses and providing cash flow support. Erwin Sieders, Tax Partner at EY, together with EY’s Dutch Desk based in London, explains the most important and relevant measures for businesses.
Note that the below summary is not meant to be an exhaustive or a complete list of (announced) measures, and measures may change on a daily basis, so please check government’s communication and consult an expert.
Cash flow support:
- Businesses experiencing liquidity issues can request a special extension of tax payments from the Dutch tax authorities. Once the request has been received by the Dutch tax authorities, taxpayers will immediately be granted the tax payment extension for a period of 3 months, and will hold off on collecting taxes. This applies to personal income tax, corporate income tax, wage tax, VAT, Health Care Insurance Act, insurance premium tax, gambling and lottery tax, landlord levy, excise duties, consumption tax on non-alcoholic drinks and environmental taxes (e.g. energy tax, sustainable energy surcharge, coal tax, waste tax and tap water tax). This payment extension can be requested by simply submitting an online form on the website of the Dutch tax authorities. One request suffices for all applicable outstanding tax liabilities for corporate income tax, wage tax, personal income tax, VAT and health care insurance act. For all the other mentioned taxes separate extension requests will need to be filed. All future tax assessments will also be covered under this special extension. Furthermore, the conditions for applying for a payment extension of more than 3 months have also been relaxed. Businesses with a total tax liability of less than EUR 20.000 are able to get a further extension by submitting a letter outlining how the company has been impacted by the corona crisis, e.g. by including additional information evidencing that the turnover or orders have significantly decreased, as compared to previous months. Businesses with a total tax liability above EUR 20.000 are able to get a further extension by submitting a statement of a third party expert (e.g. accountant, tax advisor or branch organisation).
- The interest on overdue taxes (levy interest) and interest on tax (tax interest) is temporarily reduced to nearly NIL (0.01%). This will apply to all applicable taxes and tax liabilities.
- The Dutch tax authorities will temporarily waive administrative penalties for businesses for late tax payments. Already imposed penalties will be waived.
- Companies expecting lower profits than the profits estimated in their preliminary corporate income tax assessment for FY2020 due to COVID-19 (or relating economic circumstances) can request a revision of this preliminary tax assessment, in order to receive a refund of any overpaid taxes.
- Companies are allowed to recognize a so-called corona virus provision in their FY2019 corporate income tax return for future expected corona virus related tax losses in FY2020, in order to allow businesses to deduct losses from their FY2019 profits sooner, provided certain conditions are met. These conditions have been laid down in a separate Decree published by the Dutch government. Ordinarily, companies would only be able to effectively set off / carry back tax losses incurred in 2020 against their 2019 tax profits, when filing the FY2020 corporate income tax return and when the Dutch tax authorities subsequently has imposed a final tax assessment (which is in 2021 at the earliest). As such, it may take a while before a company is actually able to utilize its FY2020 tax losses, which can result in liquidity issues. Therefore, by allowing companies to recognize a corona virus tax provision in the FY2019 corporate income tax return, a company is now already effectively able to set off its expected FY2020 tax losses in FY2019, resulting in a liquidity benefit. After recognizing the corona provision in the FY2019, a company is able to request the Dutch tax authorities for a revised (lower) FY2019 preliminary tax assessment, which could result in a potential tax refund for overpaid corporate income tax. If a taxpayer already filed a FY2019 corporate income tax return, but want to nevertheless make use of this corona provision, it can subsequently file a revised / additional tax return.
- After consulting with energy providers, the government has decided to approve that the payment of energy tax and the levy of Sustainable Energy Surcharge (ODE), including VAT, can be deferred for energy providers for the months April, May and June 2020, provided certain requirements are met. Energy providers can decide whether to grant businesses this extension, but note that not all energy suppliers will be able to implement this measure and not all businesses are eligible. It is recommended to contact your energy supplier to find out what applies to your specific situation.
Supporting businesses and employment:
- Temporary Emergency Bridging Measures for Sustained Employment or NOW scheme: a company expecting a loss of turnover of at least 20% for 3 consecutive months can request compensation in salary cost. The compensation can initially be claimed for 3 months, with the possibility to extend it for an additional 3 months. The maximum amount of compensation that can be claimed is 90% of the employee costs over a period of three months, depending on the turnover loss. The wage compensation per eligible employee is capped at EUR 9,538 gross per month. On top of that there is a 30% surcharge for employer’s costs, such as pension premiums, employer insurance premiums, as well as holiday allowances et seq. After the application the employer will receive an advance payment of at least 80% of the expected compensation (within 2 to 4 weeks). A condition of this measure is that employers are obliged to continue paying wages to its employees and that during the compensation period no personnel can be dismissed on business economic grounds. One can apply for the NOW scheme up and till 31 May 2020.
- A one-off fixed tax-free compensation of EUR 4,000 for a period of three months for companies in a number of specific sectors that have been affected by the COVID-19 outbreak the hardest (e.g. restaurants, cafes, etc. that are forced to close down).
- A temporary compensation measure for the self-employed to bridge the loss of income, which applies for a period of 3 months as per 1 March 2020. Self-employed workers can obtain an additional allowance (up to the social minimum) for their living expenses for that period through an accelerated procedure, which does not have to be repaid and there is no conditional wealth test or partner test. This can be applied for in the municipality where the self-employed person lives. An advance payment is possible. In addition, support for the self-employed is also possible by applying for a working capital loan, against a reduced interest percentage.
- In order to further support the self-employed, the current hourly criteria that needs to be met in order to claim the self-employed tax deduction will be relaxed.
- Businesses that run a tourist accommodation can request an extension of the municipal tourist tax or a reduction of preliminary assessment in the municipality where the accommodation is located. This may differ per municipality.
- Most Regional Water Authorities may allow for a temporary extension of payment of water authority tax. Businesses should check with their particular Regional Water Authority whether they are eligible for such an extension and for how long.
- A tax neutral conversion into a Dutch NV/BV, business merger, legal merger and demerger can generally be effectuated with retroactive effect to the beginning of the year, provided certain conditions are met. One of these conditions implies that certain legal actions should be taken within a certain timeframe after the desired effective date (generally 15 months for business mergers and conversions and 12 months for mergers and demergers). The government will grant an extension of 3 months for this deadline, if this deadline would have been expired in the period between 1 March 2020 till 31 May 2020.
- The general fix budget under the WKR regime for tax free allowances and benefits in kind for employees by employers has been increased from 1.7% to 3% of the taxable wages up to EUR 400,000.
- Businesses that second care personnel or donate medical equipment or devices will not have to deal with the usual VAT rules concerning these actions. This will ease the administrative and financial burden in the care sector.
Liquidity and financing support:
- Extension of the Business Loan Guarantee Scheme (GO): companies that are unable to obtain financing or guarantees from banks are able to use the GO regulation. The GO regulation benefits both SMEs and large enterprises by providing a 50% guarantee on bank financing and bank guarantees. The maximum guaranteed amount of the GO regulation will be increased by EUR 400m to EUR 1.5 billion. In addition, the maximum amount of guarantee per company will temporarily be increased to EUR 150m.
- Postponement and interest discounts from microcredits provider Qredits for small businesses and start-ups. For these companies affected by the COVID-19 outbreak Qredits will offer a six month deferral of loan repayments and an automatic reduction of the interest for this period to 2%.
- Extension of the guaranteed SME credits (BMKB) as per 16 March 2020, to help SMEs that are affected by the coronavirus to secure bank guarantees and bridge financing. Under the BMKB scheme the Government will partly guarantee for companies that are unable to provide sufficient securities to bank in order to obtain a loan. The guaranteed credit amounts up to 75% of the debt and the guarantee of the Government amounts up to 90% of this guaranteed credit.
- The regulation Guarantee for SME-Agriculture loans (the equivalent of the BMKB for the agricultural business), will also be extended to provide a temporary guarantee for working capital.
- Start-ups and scale-ups can apply for the Corona Bridging Loan. Regional Development Companies supply the loans that vary between EUR 50,000 and EUR 2 million.
COVID-19 legislative measures taken by the India
The Indian Government has announced series of measures to support the economically weaker section of the society with a US$ 23 billion package and issued certain relief measures to support taxpayers and businesses in general. Amit B. Jain, Tax Partner, and Ronak Sethi, Tax Manager at EY’s Indian tax desk based in London, explain the most important measures:
Supporting businesses and taxpayers:
- Relaxation for compliance filing: Government has notified the period between 20 March 2020 to 29 June 2020 as the “specified period” for granting timeline relaxation for filing compliances under corporate income-tax, personal income-tax and indirect tax (Goods and Services Tax). Due date for compliances falling due between this period as well as due date for appealing against any audit orders issued by tax authorities would stand extended to 30 June 2020 without any penalty or fines.
- Moratorium for corporate law filings: A moratorium period has been imposed from 1 April 2020 to 30 September 2020 for filings to be done with the Ministry of Corporate Affairs, and no additional fees will be applicable for late filings during this period.
- Relaxation on minimum period for holding board meetings: As per the current provisions, a company is required to hold a minimum number of four meetings of board of directors every year in such a manner that not more than one hundred and twenty days shall intervene between two consecutive meetings of the Board. This requirement has been relaxed for a period of 60 days till next 2 quarters. Inability to hold one meeting by independent directors would not be considered a violation of regulations
- Inability to meet minimum residency period (182 days in a tax year) of a director would not be considered a violation
- Investment in saving instruments or investments for roll over benefit of capital gains under income tax regulations where time limit is expiring between the specified period is extended to 30 June 2020.
- Taxpayers are permitted to defer their tax instalments falling due within the specified period to 30 June 2020 subject to concessional interest rate of 9% (generally between 12%-18%) to support working capital management. However, there would be no penalty or prosecution implications for the taxpayer.
- Small Industries Development Bank of India (SIDBI) announced loans up to INR5 million (US$71,000) to MSEs that are manufacturing medical supplies to combat COVID-19.
- Foreign direct investment (FDI) regulations amended to curb opportunistic takeovers / acquisition of Indian companies. Investors from countries sharing a land border with India would be required to take prior Indian Government approval before making direct or indirect investments in the country.
- 24X7 clearance at all customs stations till 30 June 2020 to address any congestion, delay or surge on account of the prevailing conditions under COVID 19.
- Setting up helpdesks to facilitate smooth process of international trade, relaxation for filing compliances. Extension of foreign trade policy benefits for one additional year
Liquidity and financing support:
- Reduction of policy repo rate of 75 bps announced by Indian Central Bank to boost liquidity
- An optional moratorium has been announced by the Central Bank for all instalments (principal and interest) falling due between 1 March 2020 and 31 May 2020 to cover EMIs and term loan repayments. Moratorium would also apply to credit card payments.
- Salaried employees permitted to withdraw funds from their social security contribution corpus subject to 75% of account balance or 3 months of basic salary and certain allowances, whichever is lower
- Deferment of interest on all working capital facilities which were outstanding as on 1 March 2020.
- Medical insurance cover of US$ 70,000 / person to be provided to cover 2 million healthcare services and ancillary workers
- Direct food distribution scheme to provide immediate help to people in dire need
- Direct cash transfers benefit for identified vulnerable groups such as farmers, widows, pensioners and differently abled people, cooking gas provision for 80 million households etc.
Note that the above is not meant to be an exhaustive or complete list of measures, and measures may change on a daily basis, so please check government’s communication and consult an expert.
For further detailed information, reference is made to the following links:
- The EY COVID-19 stimulus tracker is tracking the measures (tax and other) that governments are introducing across various jurisdictions in response to COVID-19. This is being updated every day. https://www.ey.com/en_gl/tax/how-covid-19-is-causing-governments-to-adopt-economic-stimulus–
On Dutch measures:
- Link to NL government website: https://business.gov.nl/corona/overview/the-coronavirus-and-your-company/
- Link to relevant EY NL Tax Alerts:
On Indian measures:
- Link to EY webcast on key changes in the Indian tax and regulatory regime, together with action plans that aim to address impact of COVID-19 https://www.ey.com/en_gl/webcasts/2020/05/covid-19-indian-tax-regulatory-updates-strategies-and-priorities
- Link to relevant EY India Alerts: https://assets.ey.com/content/dam/ey-sites/ey-com/en_in/topics/covid-19/pdf/ey-india-tax-tracker-covid-19.pdf