At the insistence of the House, State Secretary Vijlbrief of Finance stated in a room letter additional temporary emergency measures have been announced. They will be implemented by law through a separate bill as part of the 2021 tax plans. They have been set out in advance in the Decree on emergency measures relating to the coronavirus crisis.
Additional temporary emergency measures
The measures in question are as follows:
- reduction in normal pay
- relaxation of the hours criterion
- increase in the WKR tax-free allowance
- creation of a COVID-19 tax reserve
- Postponement of the entry into force of the bill on excessive borrowing from one’s own company
- temporary deferral of mortgage payments without affecting the home ownership scheme
We will briefly outline the additional measures below.
Reduction in usual pay
A director and major shareholder (DGA) who works for his or her private limited company (or companies) must receive a salary from that company (or those companies). That customary salary must also be paid even if the company’s turnover or profit is temporarily somewhat lower.
However, in light of the coronavirus crisis, the director and major shareholder is now permitted to receive a salary that is reduced in proportion to turnover. The standard salary for 2020 may be determined using the following formula: A * B/C.
- A = the usual wage for 2019
- B = turnover for the first 4 calendar months of 2020
- C = turnover for the first four calendar months of 2019
Conditions:
- the current account debt or the dividend is not reduced by the lower customary salary;
- if the director and major shareholder has in fact received a higher salary, that higher salary applies;
- This approval does not apply insofar as turnover in 2019 and/or 2020 was affected by other exceptional circumstances (such as incorporation, strike, merger, demerger and other exceptional circumstances).
The approval may be applied without consulting the Tax and Customs Administration. Situations not covered by the approval may, however, be submitted for consideration.
It has already been approved that the payment of wages will be deferred until the end of 2020. See our article Temporary reduction in director’s salary.
Relaxation of the hours criterion
Business owners subject to income tax (sole traders, general partnerships (VOF)) are entitled to the business tax reliefs if they devote 1,225 (or more) hours to their business in a calendar year (the hours criterion).
Entrepreneurs who, as a result of the coronavirus crisis, are temporarily spending fewer hours on their business are deemed to have spent at least 24 hours per week on their business during the period from 1 March 2020 to 30 September 2020 (for entrepreneurs applying the reduced hours criterion for the start-up allowance in the event of incapacity for work: 16 hours). The figure of 24 hours per week is calculated by dividing 1,225 hours by 52 weeks.
Entrepreneurs who carry out seasonal work and experience a peak in the number of hours worked during the period from 1 March 2020 to 30 September 2020 inclusive are deemed to have worked the same number of hours in 2020 as they did during the same period in 2019.
Increase in the WKR tax-free allowance
The discretionary allowance under the work-related expenses scheme (WKR) is being increased for the first €400,000 of the total wage bill. In 2020, this portion of the discretionary allowance amounts to 1.7%. This will rise to 3%.
This relaxation gives employers greater scope to provide their employees with, for example, a bouquet of flowers or a gift voucher, tax-free. For a brief explanation of the WKR, see, amongst other things, our article WKR flat rate set at 1.7%
Tax-related coronavirus reserve
The coronavirus tax reserve is a new feature of Dutch tax law. In 2019, taxpayers subject to corporation tax may set up this reserve in an amount equal to the loss expected in 2020 (but not exceeding the profit realised in 2019, excluding the coronavirus reserve).
In this way, the 2020 loss is offset against the 2019 profit much earlier. By submitting a request for a further provisional assessment for 2019, the loss can be offset in the short term.
The exact conditions for the coronavirus tax reserve are set out in our factsheet Tax-related coronavirus reserve.
Bill on excessive borrowing
The introduction to the bill Excessive borrowing from one’s own company will be postponed from 1 January 2022 to 1 January 2023. The first reference date will therefore be 31 December 2023. Or will this postponement ultimately lead to … cancellation?
We describe this bill in our article Combating excessive borrowing from own BV. This is the version that has been published for public consultation online. The bill has not yet been tabled in Parliament.
Temporary deferral of mortgage payments
The repayment requirement applies to owner-occupied home loans taken out on or after 1 January 2013. A temporary deferral of payments on these loans therefore generally means that the interest can no longer be claimed as a tax-deductible home loan interest expense.
To prevent this, additional approvals are required. See our factsheet Mortgage payment holiday.