The Dutch Government has earmarked € 62 billion in aid measures in support of business in these times of economic hardship. For example, a proposal has been presented to expand the discretionary margin for the Labour Cost Arrangement, and the scope of a specific exemption for reimbursements and allowances for qualifying training. Many of these measures were already applicable, but are now to be formalised.
Reimbursement of Fixed Costs for loss of turnover due to corona
Discretionary Margin Labour Cost Arrangement (WKR)
Formalising fiscal treatment of temporary bridging scheme for flexible workers (TOFA)
Specific exemption training costs also applicable to previous employment
Cashflow advantage with corona reserve
Bonus healthcare professionals for non-employees
Reimbursement of Fixed Costs for loss of turnover due to corona
The Reimbursement of Fixed Costs (Tegemoetkoming Vaste Lasten or TVL) is a subsidy for businesses that have suffered a significant loss of turnover due to the corona measures, and that have recurring fixed costs. The amount of the TVL subsidy depends on the extent of the fixed costs and the loss of turnover. The maximum subsidy over the period from June up to and including September, is 50% of the fixed costs to a maximum of € 50,000. The subsidy can be requested up to and including 30 October 2020.
The TVL will be extended three times by three months. Consequently, the measure will run until 30 June 2021. From October 2021 onwards, the subsidy is capped at € 90,000 per period. A business must reapply for the subsidy per period.
The main requirements for a business to qualify for the TVL are:
No more than 250 employees;
The SBI code of the business is included in the list of specified SBI codes (this includes businesses in the hospitality sector, recreation, events, fairs, venues and theaters);
The business has a loss of turnover of at least 30%. For the period of 1 January 2021 - 31 March 2021, the loss of turnover should be at least 40%. For 1 April 2021 - 30 June 2021 the minimum loss of turnover is 45%;
The fixed costs amount to at least € 4,000 per period. The fixed costs are calculated based on the actual turnover and the average fixed costs for the sector, as determined by the Dutch statistical bureau (CBS).
The TVL subsidy is considered to be income for the recipient business, and in principle constitutes taxable profit. The Cabinet considers this to be undesirable, and will formalise the exemption from tax which had already been announced. Consequently, no personal or corporate income tax is due over the TVL subsidy.
Discretionary Margin Labour Cost Arrangement (WKR)
In the Decree emergency measures corona crisis (Besluit noodmaatregelen coronacrisis), the discretionary margin (vrije ruimte) of the labour cost arrangement (Werkkostenregeling or WKR) for the first € 400,000 of the total fiscal wages, was raised temporarily from 1.7% to 3%. This will be formalised for the year 2020.
Additionally, the discretionary margin for the part of the total fiscal wages in excess of € 400,000 will be lowered structurally from 1.2% to 1.18% as of 1 January 2021. This reduction is intended to compensate for the increase of the specific exemption for training and study costs.
Formalising fiscal treatment of temporary bridging scheme for flexible workers (TOFA)
The 2021 Tax Plan includes a formalisation, with retroactive effect to 1 January 2020, of the fiscal treatment of the Temporary bridging scheme for flexible workers (Tijdelijke overbruggingsregeling voor flexibele arbeidskrachten or TOFA) applied temporarily from that date onwards. The TOFA provided a contribution to the cost of living for so-called ‘flex workers’ who suffered a substantial loss of income due to the corona crisis but who were not eligible for social security benefits and did not have sufficient means of support.
The benefits are treated as wages from previous employment, and the insurance agency UWV, which acts as the withholding agent, can apply the general tax credit.
Specific exemption training costs also applicable to previous employment
Reimbursements and allowances for qualifying training costs are subject to a specific exemption, which only applies insofar as there is a current employment. It has been proposed that this specific exemption should also apply to reimbursements and allowances which stem from previous employment. This means that employers can reimburse these training courses and study costs even after the former employee’s employment has ended.
This broadening of the scope, concerns the specific exemption for training and studies pursued with a view to earning an income, and not the specific exemption for upkeep and improvement of knowledge and skills required for the proper fulfillment of the (current) employment.
Cashflow advantage with corona reserve
The corona reserve, which was announced by the Cabinet in May of this year, has been formalised in the 2021 Tax Plan. Businesses expecting a loss in 2020 as a result of the corona crisis, may form a so-called ‘corona reserve’ in their 2019 corporate income tax return. The corona reserve shifts the loss from 2020 to 2019, which means that less corporate income tax is payable over the book year 2019. This provides a cashflow advantage.
The maximum amount of the corona reserve is the total loss that the taxpayer anticipates in book year 2020, as a result of the corona crisis. The corona reserve is capped at the profit that would have been realised in 2019, had the corona reserve not been applicable. The corona reserve is released in the tax return of the 2020 book year, and therefore increases the profit of 2020.
Bonus healthcare professionals for non-employees
Based on the Subsidy scheme bonus healthcare professionals COVID-19 (Subsidieregeling bonus zorgprofessionals COVID-19), healthcare professionals who faced the direct or indirect consequences of the outbreak of the coronavirus in their work, are entitled to a bonus of € 1,000. This net bonus will not affect personal income taxes and social security contributions, or the income that is relevant for means-tested schemes (e.g. allowances).
For healthcare professionals in an employment relationship, this can be achieved without any legislative changes, if the employer designates the bonus as a final tax component, and charges it to the discretionary margin of the WKR. If the discretionary margin is not sufficient in this regard, the employer pays a final tax levy of 80%. This levy will be compensated by means of the subsidy scheme. A similar solution will be included for non-employee healthcare professionals: healthcare institutions can also designate the bonus for non-employees as a final tax element, at a final tax levy of 75%. This proposal will have retroactive effect to 1 January 2020.
This content was published more than six months ago. Because legislation and regulation is constantly evolving, we recommend that you contact your Baker Tilly consultant to find out whether this information is still current and has consequences (or offers opportunities) for your situation. Your consultant will be happy to discuss the latest state of affairs with you.
