Supplementary tax measures in connection with corona crisis

Junior Finance Minister has announced a total of six new tax measures to help curb the fallout of the corona crisis. Five of the six measures are aimed at ensuring that businesses and entrepreneurs should (continue to) have a basic degree of financial leeway, whereas the sixth one has been designed to help out home owner-occupants. The measures are as follows:

• Reduction of customary wage in the event of sales loss.
• Easing of the hours test for sole traders.
• Liberalisation of WKR, the Work Related Expense Scheme.
• Introduction of a corona reserve as part of the corporation tax set-up.
• Postponement of the entry into force of the (proposed) excessive borrowing legislation.
• Introduction of a mortgage payment pause facility.

(1) Customary wage

Directors cum controlling shareholders of private limited-liability companies (“DGAs”) whose sales are suffering owing to the corona crisis are temporarily given permission to apply a customary wage that is proportionately lower – in line with the volume of sales that has been lost – than the statutorily defined number, thus reducing the withholding tax payment to be made by their company.

(2) Easing of hours test regime

Business owners who comply with the hours test are entitled to entrepreneur’s allowance (of which the sole trader’s allowance forms part). The essence of the hours test is that an entrepreneur should devote at least 1,225 hours per annum (or 24 hours a week) to his or her business. In order to avoid entrepreneurs forfeiting their entitlement to entrepreneur’s allowance owing to the corona crisis, the fiscal fiction for the period from the first of March up to and including the thirty-first of May 2020 will be that the weekly 24-hour minimum has been complied with. Seasonal business owners too will be able to make use of the temporary easing of the hours test regime.

(3) Liberalisation of Work Related Expense Scheme

The free margin for tax-exempt allowances and disbursements under the Work Related Expense Scheme is to undergo a one-off increase – for the current year only – from 1.7 to three percent of the first 400,000 euros of the (aggregate) wage bill.

(4) Corona reserve

This newly introduced fiscal reserve makes it possible to make allowances in a business’ 2019 profit calculation for the (corona-induced) loss said business is expecting to post in respect of 2020. Reliance on the corona reserve, the level of which may not exceed that of the business’ profit for 2019, will be strictly confined to businesses that have corporation tax liability.

(5) Postponement of entry into force of (proposed) excessive borrowing legislation

The effective date of the (proposed) excessive borrowing legislation, which is aimed at putting a stop to directors-cum-controlling shareholders taking out (substantial) loans with their own company resulting in their deferring their payment of taxes, has been pushed back by a year to the first of January 2023.

(6) Introduction of mortgage payment pause facility

The deductibility of the interest on an owner-occupied mortgage loans has been contingent since 2013 on the home owner in question making repayments towards the principal of the loan as well. Virtually all mortgage lenders have now declared themselves amenable to offering their clients a mortgage repayment cum interest payment pause for a term of up to six months depending on the lender. In contrast to the “regular” regime, it will be permissible for the mortgage borrower to pay off his or her payment pause-induced arrears during the residual beneficial term of his or her mortgage loan(s) rather than having to catch up by year-end 2021 at the latest in order not to be denied mortgage interest relief. The option is furthermore available of splitting up an existing mortgage loan into multiple loans where the mortgage borrower in question prefers repaying the payment pause-induced arrears over a period that differs from the residual beneficial term of the loan.

The above measures are to be included in the 2021 Tax Plan where they need to be regulated by law, in anticipation of which the details are to be included in an unqualified policy decision. A policy decision is to be prepared post-haste where it concerns the particulars of the measures that do not need regulation by law.

Dutch version: Aanvullende fiscale maatregelen coronacrisis