Netherlands: Tax relief extended for fourth quarter of 2021 (COVID-19)

The “caretaker government” on 26 November 2021 announced additional relief measures in response to the coronavirus (COVID-19) pandemic.

The government is once again extending a relief package—this time, for the fourth quarter of 2021. The extension involves, among other things, the introduction of the fifth “temporary emergency bridging measure to retain jobs” (Tijdelijke noodmaatregel overbrugging voor werkbehoud—NOW 5) and an extension of the “overhead compensation” (Tegemoetkoming Vaste Lasten—TVL) relief the fourth quarter of 2021.

The special deferral of payment will be extended, and the late-payment interest rate will remain at 0.01% for an additional six months. The government intends to introduce additional relief measures for the sports and culture sector.

Special deferral of payment: The government extended the special deferral of payment for tax debts for the fourth quarter of 2021. The extension will automatically apply to businesses with outstanding tax debts that are eligible for the special deferral of payment policy. The extension applies to all taxes that are eligible for deferral under the emergency decree and of which the last date for payment expires before 1 February 2022. Businesses that have not previously applied for a special deferral or that have already paid their tax debts can reapply for a special deferral of payment.

Late-payment interest: The late-payment interest rate will remain at 0.01% through 30 June 2022. The rate was set to increase to 1% beginning 1 January 2022; it will now increase to 1% as of 1 July 2022, after which it will increase by one percentage point every six months. Thus, beginning on 1 January 2023, the late-payment interest rate will increase to 2%; on 1 July 2023 to 3%; and on 1 January 2024 to 4%.

Payment discount: The amount of the payment discount is linked to the late-payment interest charged by the Dutch tax authorities. It is not technically possible to “uncouple” this. Extending the period in which the reduced late-payment interest rate of 0.01% is applied through 30 June 2022 thus means that the payment discount for many taxpayers will be (considerably) lower.

Cross-border workers: The agreements with Belgium and Germany concerning working-from-home relief measures currently apply through 31 December 2021. In light of recent developments, the government of the Netherlands will ask Belgium and Germany for a further extension of these agreements. With regard to social security, it has been agreed in an EU context that working-from-home must not result in a change to the EU Member State where the contributions must be paid. This measure in principle applies through 31 December 2021. An extension of this agreement is on the EU agenda for mid-December 2021.

Main features of NOW 5

NOW 5 will apply for the period 1 November 2021 through 31 December 2021. [This means that the turnover figures from the relatively good month of October 2021, economically speaking, will not count.] The other conditions remain largely unchanged. The turnover threshold will remain at 20%, the subsidy percentage at 85%, the fixed increment for employer expenses at 40%, and the maximum salary per employee to be taken into account will remain the same at twice the maximum daily wage per month. The reference month for the payroll will be September 2021, and the reference turnover will be determined by dividing the turnover in 2019 by six, with the exception of businesses that started operating between 1 February 2020 and 30 September 2021.

In contrast to previous NOW schemes, when applying for NOW 5, employers can no longer elect over which months they wish to have the loss of turnover calculated. For each employer, the loss of turnover will be calculated over the months November and December 2021. In addition, two changes will be made compared to NOW 4. First, the payroll exemption percentage will be increased to 15% (from 10% under NOW 3 and NOW 4). Second, businesses that started operating between 1 February 2020 and 30 September 2021 may now submit a NOW application, However, separate turnover reference periods and calculations will apply to them.

Employer obligations

As with NOW 3, if an employer applies for redundancy on economic grounds during the period the NOW is used, they have a “best efforts” obligation to help the relevant employees find new jobs. This best efforts obligation entails, for example, that the employer must contact the Employee Insurance Agency (Uitvoeringsinstituut Werknemersverzekeringen—UWV) on the employee’s behalf. If they do not, their subsidy will be subject to a 5% reduction. This obligation and accompanying penalty will also apply under NOW 5, albeit only for redundancy on economic grounds between 27 November 2021 through 31 December 2021. As was the case under NOW 3 and NOW 4, the bonus, dividend, and share redemption prohibition will also continue to apply under NOW 5.

What is new compared to the previous NOW schemes is that the reduced working hours scheme (werktijdverkortingsregeling—WTV) can continue to be applied during NOW 5. However, the WTV will not apply to corona-related applications. In order to prevent “double financing,” the unemployment benefit amount received by an employer will be regarded as turnover for the purposes of the NOW 5 relief.

Opening of subsidy application desk and subsidy determination desk

The government’s intention is that employers will already be able to submit a subsidy application for NOW 5 in December 2021. To realize this, the UWV is reported to be setting up the NOW systems. The UWV will pay out the NOW 5 advance payment in one installment.

In a November 2021 letter to the Lower House of Parliament, the government announced that it would be giving a new impetus to the TVL (overhead compensation). The government has now decided to expand the TVL for the fourth quarter of 2021 on a number of points. First, the state aid limit per business or group of associated enterprises will be increased to € 2.3 million (from €1.8 million). The maximum subsidy amounts will also be increased to €550,000 for small and medium-sized enterprises (SMEs) and €600,000 for non-SMEs. In addition, the government will increase the subsidy percentage to 100% (from 85%).

With new restrictions, the cultural and creative sectors are affected, given it is no longer possible to attend a theatrical performance, concert or musical after 5:00 p.m. The government is making €68 million available for a specific relief package to support the cultural and creative sector until the end of the year. It is expected that the elaboration of this relief package will be completed at the beginning of 2022.

The previous compensation schemes for amateur sports will again be available for the period during which the measures apply, as compensation for their overhead expenses and rent. Municipalities will also be given the option to provide support to ice rinks and swimming pools.

Read a December 2021 report prepared by the KPMG member firm in the Netherlands