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The management of expectations with regard to stakeholders is one of the spearheads of the ongoing development of the tax authorities' horizontal monitoring. For that reason we expect active stakeholder management to play an important role.
You can satisfy the supervisors' demands to a considerable extent and, in that way, contribute to the smooth resolution of the COVID-19 measures, using recorded and documented monitoring and testing. In this way supervision can take place wherever it is necessary.
In addition, having a fiscal strategy offers a handle on which to base choices with regard to the relationship with tax authorities and the pursuit of fiscal facilities. Especially in the light of several media publications which have attracted a lot of attention, it is important to be aware of the various advantages and disadvantages, including reputational risks.
The COVID-19 crisis is having an effect on pay packages. Depending on your type of company you must, for example, evaluate and amend the allocation of performance shares, participation plans and incentive payments. As regards the broader personnel policy, the question is where and how you want to start using your talented and key employees. A reorganisation to some extent may be necessary in order to create the required flexibility. As regards all these matters it is essential to draw up a communications strategy and plan for employees and other stakeholders. You can read more here about the effect of the crisis on Personnel & HR.
The possibility to suspend, on a short term, the payment of pension contributions depends on the agreed payment terms and on the collection policy of your pension provider. Many pension providers have responded to the call for leniency when entering into payment arrangements for acute liquidity problems. Read more about the general (statutory) preconditions for premium payment and premium arrears on Measures against the impact of the coronavirus. Here, you can also read more about possible options for a payment retention or unilateral changes to the pension agreement.
If you (temporarily) have to lay off temporary workers, on-call staff, sole traders or employees with a(n) (expiring) temporary contract, it is a good idea to keep in contact with them. Check with them to see whether they need any help during the coronavirus crisis, such as the Temporary Support Scheme for Self-Employed Persons (Tozo), or as of 1 October 2021 the Bbz (with temporarily relaxed conditions), and whether they have the information needed. This contact and aftercare are important if you would like to work with them again once your situation has improved.
Employers can optimise their cash flows in the medium term by changing employment conditions, such as the number of working hours per week (in consultation) and the overtime payment arrangements. One way of optimising your cash flow in the medium term is to change, adjust or postpone (variable) remunerations for higher management and directors.
In 2020 employers were allowed to continue to pay the fixed travel allowances tax-free, even if the employees actually worked from home and no longer traveled. The government has indicated to extend this scheme until 1 January 2022. After this date the measure is no longer be applicable. We advise you to draw up a new policy for the reimbursement of travel expenses, anticipating more structural homeworking if this applies to your organization.
The Dutch Budget Day 2021 included a proposal for a tax free allowance for working from home costs. More information can be found here. This will be implemented per 1 January 2022. The background of this new measure is that it is expected that employees will work more often from home after the corona crisis creating a need for a structural scheme.
Due to the coronavirus crisis it is logical that you may spend your work-related costs budget in a way that you did not plan. The limited increase in the work-related costs budget in 2020 and 2021 (for the first 400,000 euros of the wage bill the budget has increased from 1.7 to three percent) also gives you, as an employer, some extra leeway. You may be able to use any surplus in the work-related costs budget to compensate employees for a lower expense allowance or to help employees in some other way. Subject to certain conditions the work-related costs budget can also be used to accommodate gross or grossed up payments so that you can save on costs.
If the NOW scheme and/or the reduction in personnel costs does not have a sufficient effect you will, in extreme cases, have to resort to more drastic measures (for example a reorganisation with dismissals). A reorganisation including (collective) dismissals is subject to strict legal rules. You can find more about this on our Dutch web page: Intelligent Rightsizing - Optimal staff deployment in conjunction with employee-related cost control.
As of 1 April 2020 it has been possible to apply for a transition compensation which is paid to an employee who has been ill for more than two years. The arrangement applies for transition compensation amounts which have been paid upon termination of the employment contract due to the fact that the employee was no longer able to perform the agreed work due to illness. If you have paid transition compensation (amounts) since 1 July 2015 to an employee who has been ill for more than two years, you can apply for compensation using an online form from the UWV. As regards old cases, whereby the transition compensation was paid between 1 April 2015 and 1 April 2020, you have until 1 October 2020 to do so. If you have paid the transition compensation from 1 April 2020 onwards, you can apply for compensation within six months of having paid the transition compensation.
Employers who are considering offering employees the possibility of working from home on a more structural basis must take account of the fact that this can affect the tax and social security position of international employees.
From the perspective of employment law, the law of the country that employees and employers agree on (for example in the employment contract) applies to the employment relationship (choice of law) of most internationally operating employees. However, despite the agreed choice of law, it cannot be excluded that employees, after a period of time, can successfully invoke employment conditions which apply in the country in which they 'usually' perform their work, insofar as these provisions are more favourable than those on the grounds of the choice of law.
Employees who physically perform 25 percent of their work within the EU from their country of residence must have social insurance in their country of residence. As far as employers are concerned this may lead to unforeseen costs and administrative obligations in the employee's country of residence (for example in connection with processing a payroll for the payment of social security premiums). The Dutch social security authorities have communicated that the social security position from a Dutch perspective does not change (for the time being) if an international employee from the EU/EEA or Switzerland temporarily works in another country (from home) than usual due to the corona measures. This applies to all cases of living and working within the EU/EEA and Switzerland.
In addition, the income that is related to physical working days in the country of residence is taxed in the country of residence on the basis of the bilateral tax treaties. The payment of this tax may lead to administrative obligations for the employer in the employee's country of residence. The net income may also change if the tax levy (partially) shifts to the country of residence. It is a good idea for employers to establish a clear policy of how to respond to any changes in the net income of employees.
The Netherlands has concluded mutual agreements with Belgium and Germany for the taxation of international employees in the context of the coronacrisis. The mutual agreements have been extended (for the last time) and are applicable up to and including 30 June 2022.
It is a good idea to focus on optimising your cash flow in connection with VAT payment and outstanding VAT receivables in the Netherlands and abroad. This starts with so-called cash recovery by collecting outstanding VAT receivables as fast as possible. The second step is to assess whether working capital can be improved in the field of VAT (such as rates, the amount of taxable payments and periodicity of filing returns and the reverse-charging of import VAT).
There are often tricky VAT aspects to a sale and leaseback structure which is set up to improve liquidity. This is because, as far as VAT is concerned, a sale and leaseback structure is generally not regarded as pure refinancing.
The 'new normal' may imply a temporary or permanent transition from face-to-face services to digital services. For VAT purposes, for instance, the location of the service in the context of cross-border services and the reduced VAT rate for online gym training during the mandatory lockdown periods have become relevant.
The 'new normal' may provide grounds for the further digitalisation of administrative VAT processes, to reduce disruption to the processes and facilitate more VAT data analysis.
Solutions to deal with (expected) problems relating to the flow of goods may have an effect on customs parameters (such as origin, rate and value). The analysis of customs data from 2020 may create opportunities for a refund of, and savings on, customs duties or for optimisation and risk management.
Debt receivables may lose their value if it is unsure whether the purchaser can pay them. On the one hand a loss on a receivable is, in principle, deductible. On the other hand you can consider selling these receivables to a third party in order to improve your liquidity position.
In order to create liquidity in your business in times of crisis, you may consider a sale and leaseback transaction of intangible fixed assets or immovable property. This transaction can be entered into with both other group companies and third parties (for example banks and financing companies) as the purchaser of the asset. The greater the value of the asset, the greater the liquidity improvement. However, you should note that the lower the tax book value of the asset, the greater the possible (taxed) surplus value as a consequence of the transaction.
If, as an entrepreneur in 2020, you generated a substantially lower profit (or other income) compared to the two previous years (2018 and 2019), you can submit an averaging request. On the basis of that request the incomes of these three years will be added together and then divided by three. As a consequence of this, the incomes in 2018 and 2019 will be reduced and the income for 2020 will be increased in such a way that the income in all three years is equal. The benefit of this is that, on average, a larger portion of the income will be subject to a lower rate. If the difference with the originally payable tax is greater than 545 euros you may, under certain conditions, receive a tax rebate.
As you can read on the web page detailing the coronavirus measures you can create a corona tax reserve under certain conditions in 2019. This reserve is maximised at the profit in 2019 without formation of the corona tax reserve.
How do the risks of COVID-19 manifest themselves and which group entities should bear these risks? Check whether there is, for example, any reason to (temporarily) adapt the transfer prices and which information you need to substantiate this. Have you drawn on extra financing under existing credit facilities and who is paying the related interest expenses? Make sure that your 2020 transfer pricing position is clear and sufficiently substantiated well in time.
In many cases the COVID-19 crisis means that employers have asked employees to work from home. Sometimes the employee's country of residence is a different country to the country in which the employer has its place of business and in which the activities usually take place. The question is whether this situation can lead to the permanent establishment of the employer in the employee's country of residence, with the consequence being non-compliance with the rules and sometimes even double taxation. Usually this is not the case because there is no long-term element. However, the expectation is that, in many cases, working from home is (partially) going to become the 'new normal'. This increases the risk of the employer having a permanent establishment in the employee's country. Because this differs per country and type of tax, it would be good for you as an employer to assess these risks.
When the COVID-19 crisis has been brought under control further and the government has reduced its measures, the question will be to what extent the regular public sector expenditure pattern will return to what it was. As the COVID-19 situation shows, the public and private sectors are closely related and companies will continue to get a more social role, not only with regard to their employees, but also their customers. For example, this can be seen in the energy transition, regional investment agendas (RIAs) and the approach used in the social domain.
It is therefore plausible to think that a larger number of similar initiatives will be tailored to this concept of hybrid governance of social initiatives, whereby public and private will jointly offer financing options and determine how the targets are to be met.
Check the contract to see if it contains possibilities to terminate the contract. Incidentally, some forms of contracts may always be terminated on the basis of the law or case law, regardless of what the contract states. However, this termination may be subject to conditions, such as a notice period or even an obligation to compensate damages.
Across the globe governments are taking support measures in connection with the coronavirus crisis. These may apply to your industry or sector. See here for an overview of the International (fiscal) support measures.
Companies are considered to be established at the location at which the directors actually manage them. Due to the travel restrictions as a consequence of the coronavirus measures it may be the case that directors are temporarily managing the company from a different country. If this is permanent, it may result in the company's place of business - and with that the place at which that company's profit is taxed - shifting to a different country.
In many cases the COVID-19 situation means that employers have asked employees to work from home. Sometimes the employee's country of residence is a different country to the country in which the employer has its place of business and in which the activities usually take place. The question arises as to whether this situation can lead to the permanent establishment of the employer in the employee's country of residence, with the consequence being non-compliance with the rules and sometimes even double taxation. Generally this is not the case because there is no long-term element. However, the expectation is that, in many cases, working from home is (partially) going to become the 'new normal'. This increases the risk of the employer having a permanent establishment in the employee's country. Because this differs per country and type of tax, it would be good for you as an employer to assess these risks.
In practice it may be the case that employees live in one country but work in another. Tax treaties divide the authority to levy between the country of residence and the country of employment. It is not yet known what the 'new way of working' is going to look like after the coronavirus crisis. Employers that are considering offering employees the possibility of working from home on a more structural basis must take account of the fact that this can affect the tax and social security position of international employees, as well as the treaties preventing double taxation which mean that the authority to levy may shift from the country of employment to the country of residence and vice versa. Because this differs per country and type of tax, it would be good for you as an employer to assess the effects and compliance obligations. The agreements which have been made within the EU in the field of social security may well no longer apply (after the coronavirus measures have ended). The mutual agreements with Belgium and Germany for the levying of tax for international employees apply up to and including 30 June 2022.
The coronavirus crisis may provide clear evidence that your company needs extra financial flexibility. As a major shareholder you may be confronted with the question of whether you should provide this financial flexibility from your private capital by means of a capital contribution or by issuing a loan. If you issue a loan to your company, you must agree on a commercial interest rate with your company (in other words an interest rate which an independent third party would charge in the same circumstances). That may cause undesirable extra financial pressure for your company and possibly put it in a difficult position with regard to other (banking) financiers involved.
One aspect to bear in mind is that, in principle, a capital contribution does not place any extra financial pressure on your business. However, a capital contribution does mean that you are in a weaker position in the unfortunate event of your company no longer being able to fulfil its financial obligations. On top of this a capital contribution for personal income tax can only be repaid untaxed if laid down in a notarial deed. If you make the necessary agreement, a loan can be repaid without any formal requirements being attached. You should therefore carefully weigh up what kind of financial support best suits your situation and your business.