Same law, different lawyers
29 April 2020

Update of Dutch relief measures for companies during the Covid-19 crisis

Additional measures in relation to the financing of companies

In our recent blog earlier this month we already discussed the measures announced in relation to (i) the Corporate Finance Guarantee Scheme ("GO Scheme") and (ii) the Government-Guaranteed Scheme for Small and Medium-Sized Enterprises (Borgstelling MKB-kredieten) (the "SME Guarantee Scheme"). On 28 April 2020, the Dutch government published the updated GO Scheme which now also includes the temporary 'Corona module' (the "GO-C Scheme") and announced further measures in relation to the SME Guarantee Scheme. We will briefly discuss these items below.

GO-C Scheme 

With the GO Scheme the Dutch administration helps small and medium-sized enterprises ("SME's") and big enterprises by providing a guarantee on bank loans and/or bank guarantees ("Loans"). The GO-C Scheme (with an effective date of 29 April 2020) has specifically been introduced for companies that require additional liquidity as a result of the Corona virus (and is not available for companies that were already in financial difficulties before the outbreak of the Corona Virus). Under the GO-C Scheme, the Dutch administration guarantees 90% of (unsubordinated) Loans that have been made available to SME's and 80% of (unsubordinated) Loans that have been made available to large companies. The maximum amount of a qualifying Loan is to be determined on the basis of loan costs, turn-over and a liquidity plan and the applicable interest will be the same as for a loan which does not benefit from a government guarantee. Finally, a Loan under the GO-C Scheme will have a maximum tenor of six years.

Changes to the SME Guarantee Scheme

The Dutch administration also announced modifications in relation to the SME Guarantee Scheme. The temporal scope of the extended SME Guarantee Scheme will be broadened so that it applies to bridge loans and/or overdraft facilities with a tenor of 4 years (instead of 2 year) thereby providing entrepreneurs more time to repay the bridge loans and/or overdraft facilities. Also, the eligibility requirements will be made more flexible by introducing the possibility of a turn-over test (instead of the more detailed liquidity prognosis). We will send out a new client briefing as soon as we have more information in relation to these changes and the entering into force thereof. 

Additional Tax Relief Measures

As part of the updated Corona package, entrepreneurs will be allowed to set off expected losses for financial year 2020 with any taxable profit reported in financial year 2019. This only applies to corporate income tax and not personal income tax. The mechanics to achieve this entail the formation of a so-called corona-reserve in the 2019 corporate income tax return. The formation of this reserve will reduce the 2019 taxable profit. The amount of the reserve cannot be higher than the 2019 taxable profit. Through this, entrepreneurs can request a reduction of the 2019 preliminary corporate income tax assessment meaning that they do not have to wait to 2021 (in relation to filing the 2020 preliminary tax return) to make use of the expected losses and thus can already obtain a reduction or refund of tax payable. The details on formation of the corona-reserve will be disclosed by the government at a later stage.
It may very well be that more measures will follow and/or tweaks will be made, as the administration indicates that the current set of measures is part of a dynamic package.

Employment Relief Measures: update

1. Update on the Temporary Emergency Relief Measure 

In our recent blogs, we have already informed you about the Temporary Emergency Relief Measure for the Preservation of Work (Tijdelijke noodmaatregel overbrugging voor werkbehoud, hereinafter ''NOW'').  The main purpose of the NOW is to provide rapid and generous financial support to employers facing a decrease in turnover, to enable them to continue the payment of wages.

1.1 Applicability of the NOW for group companies 
One of the conditions for a company to be entitled to a NOW-subsidy is that the company has an expected decrease in turnover of at least 20% during a measurement period of three consecutive months.  In case a company belongs to a group, the decrease in turnover will be determined at group level, as a consequence whereof a company with an expected decrease in turnover of more than 20% will – in principle - not be entitled to the NOW-subsidy if the decrease in turnover at group level would be less than 20%.

This test at group level will be adjusted to ensure that operating companies (werkmaatschappijen) will also be entitled to a NOW-subsidy if the decrease in turnover at group level would be less than 20%, provided that the following conditions are met:

  • The operating company must have legal personality (rechtspersoonlijkheid);
  • A group company of which an operating company requests for a NOW-subsidy must declare not to pay any dividend or bonuses for 2020 or repurchase its own shares, up to, and including, the date of the shareholders' meeting during which the annual accounts for 2020 will be adopted;
  • An operating company with at least 20 employees has to agree upon an arrangement on the preservation of jobs with the interested employee associations , such as trade unions, in the sense of the Dutch Collective Redundancy Notification Act (Wet Melding Collectief Ontslag) and in the absence thereof with another employee representatives;
  • Groups with an intra-group secondment operating company (personeels-bv's) cannot make use of this amended group level assessment, i.e. such group companies will  always need to calculate the decrease in turnover at group level.In order to limit strategic behaviour, a number of conditions and warranties are proposed which will have to be assessed by an accountant, which will have to be further defined in the standards to be applied by accountants.

1.2 Announced additional measures with regard to flex and seasonal workers
There are currently no specific COVID-19 regulations for flex workers such as temporary-, payroll- and on-call workers.  But, the Dutch Government hasannounced that the possibilities for an additional safety net for these flex workers, including a solution for seasonal work, are being explored.
The Dutch government has indicated that it will provide more information on the progress of both schemes as soon as possible.

2. Overtime and unemployment insurance contribution 

After the Balanced Labour Market Act (Wet arbeidsmarkt in balans) entered into force on 1 January 2020, employers have to pay a lower (2.94%) unemployment insurance contribution (hereinafter: ''WW-premium'') for employees working on the basis of an employment agreement for an indefinite period of time, and a higher (7.94%) WW-premium for employees with fixed-term employment agreements and on-call agreements.
In this regard, an arrangement has been made in the Decree Social Insurance (Funding) Act (Besluit Wet financiering sociale verzekeringen) regarding overtime.  Employers must retroactively pay the higher WW premium for employees with employment agreements for an indefinite term who have worked more than 30% overtime in a calendar year.  However, due to the current circumstances, this scheme has been suspended for all employers until 1 January 2021.

3. Administrative tax obligations for an employer

The Dutch government has published the ''Policy decision on tax concessions in response to the COVID-19 crisis'' (Beleidsbesluit fiscale tegemoetkomingen naar aanleiding van de coronacrisis, hereafter: ''the Policy'').  The Policy applies with retroactive effect as of 12 March 2020 and has a temporary nature.

3.1 Travel compensation
Many employers have agreed to a fixed and tax free travel compensation.  However, due to the COVID-19 crisis, many employees have a changed travel pattern (also in terms of the costs of transport).  In case of ''absence'' of the employee during more than six weeks, for example, because the employee works from home now and does not incur any travel costs, the employer would - in principle - need to amend the fixed travel allowance.

However, the Dutch government has indicated that this would be inappropriate and undesirable, because this could result in the travel compensation being taxed as wages. Therefore, during the term of the Policy, the travel compensation will not be considered as "disguised wages" (verkapt loon) by the Dutch tax authorities and the employer may continue to pay the fixed travel allowance as usual, without withholding taxes.

3.2 Easing administrative obligations
Employers have certain statutory payroll taxes obligations.  Due to the current COVID-19 crisis, employers may not be able to (fully) meet these obligations (on time).  This could result in a sanction.  The Dutch government has indicated that this is not desirable.  For example, it may currently not always be reasonably possible to timely establish the employee's identity on the basis of an original identity document.  Therefore, the higher payroll tax (''anonymous rate'') will not be applied provided that the employer establishes the identity of the employee as soon as reasonably possible.  Please note that employers are still obliged to include a (digital) copy of the identity document timely in the payroll records.

4. Final remark

If you have any further questions about Dutch employment law (relief measures) during the COVID-19 crisis, for example, about the Governmental measures, amendment of employment conditions, extension of contracts and reorganisations, kindly feel free to contact us.

For more information, please contact Wouter Jongen, Robert Masman, Anita de Jong, Maria Benbrahim or Alexander Fortuin.