Since we, on 14 March 2020, our article Since we last wrote about the special deferral of tax payments in connection with the coronavirus crisis, a great deal has been said and written on this subject. This is a good reason to summarise the current situation in this new article.
This article is an update of an earlier version. This version describes the scheme based on the information available as at 28 April 2020. It incorporates the information from the update to the Decree on Emergency Measures relating to the coronavirus crisis of 22 April 2020, No. 2020-8499 (Information on payment deferrals can be found in section 11 of this decision).
On 28 August 2020, State Secretary Vijlbrief of the Ministry of Finance outlined how the deferral of payment will be handled. Please see our article for further details Phasing out of the special payment deferral.
Entrepreneur
The scheme is aimed at business owners. Non-business owners will therefore not be able to make use of the special deferral of payment. They may, of course, still make use of the standard deferral of payment.
Corporation tax and VAT are payable only by business owners.
Employees may also be employed by an employer who is not an entrepreneur. An example is an employee of a foundation or association that does not carry on a business. It is likely that the scheme also applies to the payroll tax that must be paid by an employer who is not an entrepreneur.
For the purposes of income tax, an ‘entrepreneur’ is defined solely as a person who declares business profits in their tax return. This includes the operator of a sole trader business, a partner in a partnership, and a partner in a general partnership.
Others will probably not be able to claim the special deferral of payment for income tax purposes. These include the director and major shareholder (DGA), who, for tax purposes, is not regarded as an entrepreneur but as an employee. Nor are self-employed individuals (ZZP-ers) considered entrepreneurs if their income is taxed not as business profits but as income from other activities (although these self-employed individuals may be treated as entrepreneurs for VAT purposes).
A note or digital
The special deferral of payment is granted on the basis of:
- a letter to the Tax and Customs Administration requesting this (this letter should be sent to: Tax and Customs Administration, PO Box 100, 6400 AC Heerlen). NO expert’s report needs to be enclosed with the letter.
- digitally via the website from the Tax and Customs Administration (to do this, log in using your DigiD; legal entities must use an employee’s DigiD).
Since 2 April 2020, it has been sufficient to submit a single request for a deferral of payment. The Tax and Customs Administration will then automatically grant a three-month deferral of payment for all types of outstanding tax liabilities and for any new tax liabilities arising during this period.
When does the grace period begin?
The three-month period begins on the date on which the request for a deferral of payment is signed.
Example: you have not paid your payroll taxes on the February 2020 tax return. On 21 April 2020, you receive a supplementary tax assessment for this, which must be paid by 5 May 2020 at the latest. You must submit your application for a deferral of payment, dated 1 May 2020. The deferral will then be granted until 1 August 2020.
This extension period applies to all subsequent tax assessments.
Example: you have also failed to pay the payroll taxes on the March 2020 tax return. You will receive a supplementary tax assessment for this on 21 May 2020. You do not need to submit a new request for special deferral of payment; this has already been granted following your request submitted on 1 May 2020. The deferral of payment for the additional assessment of payroll taxes for March 2020 will then run, as for February 2020, until 1 August 2020.
Which taxes?
The temporarily relaxed policy applies to income tax, corporation tax, value added tax (VAT) and payroll tax. With effect from the week of 6 April 2020, it also applies to gambling tax, insurance tax, landlord’s levy, environmental taxes, excise duty and excise duty on non-alcoholic beverages. For customs duties, a request for deferral of payment may be submitted to the Tax and Customs Administration.
Attack
An application for a deferral of payment can only be made once the tax due has been formalised in a (supplementary) tax assessment. Deferral of payment is not granted simply because you have submitted your payroll and/or VAT return. You may request deferral of payment immediately after submitting your payroll and/or VAT return, but that request will not be granted.
Once the Tax and Customs Administration has granted you a special deferral of payment, it will continue to issue (additional) tax assessments for the tax due on new tax returns. This is, after all, how the tax liability is formalised. You do not need to apply for a further deferral of payment for those (additional) tax assessments.
Further postponement
Would you like an extension for the period after the three-month deadline has passed? If so, you will need to submit a separate application. In that case, the Tax and Customs Administration will assess whether the following conditions have been met:
- the current payment difficulties mean that a longer deferral is necessary;
- these payment difficulties have arisen mainly as a result of the coronavirus crisis;
- the tax liability for which the deferral is being requested has been declared in accordance with the reporting requirements;
- the request relates to one or more of the taxes mentioned above;
- as the total tax liability in respect of which the additional deferral is requested exceeds €20,000, a statement from a third-party expert is required (see below).
If you anticipate that you will need a longer deferral of payment, please ensure that you gather the necessary information within the first three months. VWG will, of course, be happy to help you with this.
Temporary
The extended special payment deferral is temporary. The Tax and Customs Administration will withdraw it as soon as circumstances allow, for example if the government lifts the restrictions on the sector in which the business owner operates.
Before the deferral is withdrawn, the business owner will be given the opportunity to agree a suitable payment plan. This payment plan is not subject to a maximum duration or to any other requirements set out in the standard deferral policy.
During the deferral period, the Tax and Customs Administration may request interim repayments, provided the business owner’s cash position allows for this.
Statement by a third-party expert
The third-party expert’s statement must (in any event) contain the following elements:
- that it is plausible that there are genuine payment difficulties at the time of the request for a deferral or, as is expected, in the near future thereafter (the term “near future” refers to the period during which the government’s current restrictions on the business apply; for example, the closure of the hospitality sector, sports facilities and childcare centres, as well as the ban on events);
- that it is plausible that these payment difficulties were caused primarily by the coronavirus crisis;
- a liquidity forecast which the third-party expert considers plausible (drawn up on the basis of the facts and circumstances known at the time the application was submitted).
In an explanatory note, the third-party expert specifies which documents and data have been provided by the business owner. The statement need not be a so-called assurance statement.
No set-off
During the period for which a special deferral of payment is granted, the Tax and Customs Administration will not set off tax refunds against tax debts for which a deferral of payment has been granted. The business owner may, of course, request such a set-off.
Fine
The issuing of these additional tax assessments is a fully automated process. As soon as the Tax and Customs Administration’s computer detects that a tax return has not been paid, or has not been paid in full, an additional tax assessment is issued automatically.
This additional tax assessment includes a late payment penalty on the grounds that the tax has not been paid (or has not been paid in full). It has been confirmed that these penalties will be waived automatically. However, it would be advisable to formally object to the late payment penalty imposed in the letter in which you request a special deferral of payment for the additional tax assessment.
Accountant/(tax) adviser
Your accountant and/or tax adviser does not receive additional assessment notices for payroll tax and VAT directly (electronically) from the Tax and Customs Administration. You should therefore forward these notices to your accountant and/or tax adviser immediately upon receipt.
It is also highly likely that any other correspondence regarding the (special) deferral of payment will not be sent to your accountant and/or (tax) adviser. Please forward that information as soon as possible.
Your accountant and/or (tax) adviser will receive your income tax and corporation tax assessment notices directly, but only if you have given your consent.