Parliamentary questions on supplementary tax measures
Junior Finance Minister Hans Vijlbrief has responded to Parliamentary questions on the latest bundle of corona-related supplementary measures on the following topics:
- customary wage,
- hours test,
- Work Related Expense Scheme (WKR),
- tax-specific corona reserve,
- mortgage payment pause facility.
(1) Customary wage
The Junior Finance Minister has approved a reduction during 2020 of the customary wage owing to loss of turnover, in proportionality to the loss of turnover for the first four months of 2020 compared with the same period one year earlier. There are certain conditions to be satisfied, one of which is that of no escalation of the director-cum-controlling shareholder’s current account debt to his or her company and/or the dividends he or she collects. The director-cum-controlling shareholder’s actual wage rather than the customary one is to apply where the former effectively tops the latter. No customary wage reduction will be allowed where special circumstances other than the COVID crisis are shown to have affected the level of turnover for 2019 or 2020. The absolute level of turnover is irrelevant to use being made of the approved reduction. Mr Vijlbrief in his reply recalled the earlier, gratifyingly successful deployment of the temporary customary wage reduction tool in 2009 and 2010.
(2) Hours test
One of the measures concerns the easing of the hours test for sole traders, who will be deemed over the period from 01 March up to and including 30 September 2020 to have devoted a weekly minimum of 24 hours to their business, as will entrepreneurs who temporary enter into employment elsewhere. Approval comes with several criteria geared to entrepreneurs whose operations are seasonal. One of these stipulates that a peak should be identifiable in the number of hours the entrepreneur customarily devotes to his or her business over the period from 01 March up to and including 30 September in comparison with the rest of the year, while another insists on the seasonality of the operations as such. According to Mr Vijlbrief it is up to the entrepreneur him or herself to decide whether the criteria in question are being satisfied and, if this is indeed shown to be the case, confirm his or her compliance with the – temporarily eased – hours test.
(3) Work Related Expense Scheme (WKR)
The free margin for tax-exempt allowances and disbursements under the Work Related Expense Scheme has been temporarily relaxed – for the current year only – from 1.7 to three percent of the first 400,000 euros of the (aggregate) wage bill. The temporary increase will be available to employers across the board, the idea being that those who can afford to do so will now be able to offer their employees an extra helping hand.
(4) Tax-specific corona reserve
The corona reserve for tax purposes offers entrepreneurs the option as early as in their corporation tax return for 2019 to make allowances for the loss they expect to post in respect of the current financial year. The reserve is to be capped at the amount of the expected corona-induced loss for 2020. Rather than having their burden of proof increased, entrepreneurs who intend to incorporate such a corona reserve in their 2019 tax return merely need to justify their being eligible for the scheme. The reserve is to be mandatorily released as part of the profit in 2020. The entrepreneur’s cash position will benefit from the reserve being set aside by causing the corporation tax charge for 2019 to turn out lower. Having been queried – as part of deliberations on the topic of corona reserve creation and set-off of corona-induced losses – as to the scope for extending the current term for application of the averaging facility, the Junior Finance Minister has asserted that the existing three-year term of the date of finalisation of the relevant income tax assessment for the final year of application of the averaging facility should suffice.
(5) Mortgage payment pause facility
In the event of a tax payer reaching agreement with his or her bank on being granted a mortgage payment pause, the bank will ascertain whether it has indeed been the corona crisis which is the main culprit and whether a payment pause would be the best solution. As loans taken out with non-designated administrators do not come with this type of assessment mechanism, it has been decided to introduce a supplementary condition to the effect that the applicant’s income from labour must have suffered a corona-induced decline by 20 percent or more for a period of three consecutive calendar months. Loans that are not governed by the tax-related repayment requirement are not adversely affected by such a payment pause while not qualifying for compensation. The sole consequence of the deferred payment of interest is that this may cause the timing of the associated tax relief shifting. In so far as the outstanding (debit) interest has not been rendered interest-bearing, the interest will become deductible at the moment it is paid.
Dutch version: Kamervragen pakket aanvullende fiscale maatregelen