Collection and screening after COVID support package

Repayment scheme

During the pandemic, the Dutch government helped to alleviate the financial stress of businesses by offering them a special deferral of tax payments. To qualify for this deferral, businesses were subject to a number of conditions as outlined in the Dutch Corona Crisis (Emergency Measures) Decree (Besluit noodmaatregelen coronacrisis) (in Dutch). as outlined in the Dutch Corona Crisis (Emergency Measures) Decree (Besluit noodmaatregelen coronacrisis) (in Dutch).

The special deferral of tax payments came to an end on 1 October 2021. As of that date, businesses have been expected to resume meeting their tax payment obligations. The tax collector offers businesses the opportunity to avail themselves of a specific repayment scheme to pay off their tax debts. With effect from 31 October 2022, taxpayers will be expected to repay their tax debts in 60 equal monthly instalments. The final instalment is due by 1 October 2027 at the latest. The first instalment is due in October 2022. The Dutch Tax and Customs Administration has developed a calculation tool to show taxpayers their repayment schedule (see also our blog.– in Dutch).

Businesses whose tax debt is at least EUR10,000 and which are unable to repay this debt within five years but are expected to be commercially viable, can request to have the repayment deadline for their COVID-related tax debts extended to seven years (link to page in Dutch). The higher the tax debt, the more convincing the reasons for the request must be. The request will be reviewed for necessity and feasibility. The taxpayer may not have any debts pre-dating the pandemic for which enforced collection measures have been instituted, unless it has already been granted a payment deferral for these debts. In addition, all businesses can apply for a one-off payment holiday of up to three months and/or ask for flexibility in terms of the monthly payment. If flexibility is granted, the monthly instalments will be due each calendar quarter.

Both the five and seven-year repayment schedules are subject to strict conditions, including the timely and correct filing of tax returns and payment of current tax obligations by the relevant deadlines. In our opinion, an error in a tax return should not qualify as cause to cancel the repayment scheme.

The exact scope of the conditions is not clear. Are taxpayers permitted to distribute dividends and/or pay bonuses during the five-year term of the repayment scheme, for instance? The latest version of the Decree would suggest that they are. And what circumstances qualify as harming the interests of the State and serve as cause to cancel the repayment scheme? Because of these uncertainties, there is room for interpretation of what a taxpayer may and may not do while the repayment scheme is in effect. That is why we need to keep a critical and watchful eye on any developments in this regard. That is why we need to keep a critical and watchful eye on any developments in this regard (see Hertoghs Beschouwt #260 – in Dutch).

Cancellation of special repayment scheme

The tax collector can decide to cancel the repayment scheme if the taxpayer does not meet the relevant conditions. Before cancelling the scheme, the tax collector is required to contact the taxpayer to explore options for resolving the issue. If the parties do not agree on a solution, the repayment scheme may be cancelled. The taxpayer has ten days to appeal the decision to cancel the repayment scheme to the director of the Dutch Tax and Customs Administration.

If a writ of execution is issued, the taxpayer can apply to a civil court to have the writ set aside.

If the taxpayer fails to repay its tax debts, the tax collector may hold third parties, such as the managing directors of the company or hirers, liable for the unpaid tax. We believe that this would be excessive in the context of COVID-related tax debts, given that the Dutch government has opted for a generous deferral policy.

COVID support package

During the pandemic, the Dutch government provided a support package to compensate businesses for their fixed costs (TVL), wage costs (NOW) and the cost of hiring temporary healthcare workers (COZO). The authorities have now started screening for whether or not businesses that received support acted in compliance with the conditions of the support package. It would be an oversimplification to suggest that fraud was committed by businesses that were mistaken about their loss of revenue or that, in hindsight, received more compensation than they were entitled to because of unclear schemes. We are here for you if you are suspected of having committed fraud with COVID support payments (see also Hertoghs Beschouwt #224 – in Dutch).

We are happy to answer any questions you may have and to provide input on this or any other related topic.