20 April 2020 update on the EU responses to COVID-19 (coronavirus) crisis
In this EUTA Special edition we provide an overview of the most important measures announced last week by the European Commission, as well as by our home countries Belgium, the Netherlands and Luxembourg.
On 19 March 2020, the Commission adopted a new State aid Temporary Framework to support the economy in the context of the coronavirus outbreak, based on Article 107(3)(b) of the Treaty on the Functioning of the European Union. The Temporary Framework recognizes that the entire EU economy is experiencing a serious disturbance. It enables Member States to use the full flexibility foreseen under State aid rules to support the economy, while limiting negative consequences to the level playing field in the Single Market. On 3 April 2020, the European Commission adopted an amendment extending the Temporary Framework to enable the EU Member States to accelerate the research, testing and production of coronavirus relevant products, to protect jobs and to further support the economy in the context of the coronavirus outbreak. On 9 April 2020, the European Commission has sent to Member States for consultation a draft proposal to further extend the scope of the Temporary Framework. This would enable Member States to provide recapitalizations to companies in need. Since such public interventions may have a significant impact on competition in the EU (and its Single Market), the Commission sees these interventions as measures of last-resort. The Commission has also indicated that they will be subject to clear conditions as regards the State's entry, remuneration and exit from the companies concerned, strict governance provisions and appropriate measures to limit potential distortions of competition.
Last week, many EU Member States again have notified a variety of aid measures to the European Commission under the Temporary Framework. Varying from direct grants to public loans and state guarantees.
For more information on the Temporary Framework and the various measures that were notified by the EU Member States see here.
Deferral of prepayments
If self-employed persons and companies are in a tax paying position and do not make timely prepayments of income taxes, a tax increase will be imposed. Each quarter a prepayment can be made and each prepayment leads to a tax credit which reduces the tax increase suffered if no prepayments would have been made. A prepayment made in the first quarter results in a higher tax credit than a prepayment made in a later quarter. Many self-employed persons and companies are currently facing liquidity problems due to the corona crisis and can therefore not make prepayments. In order to avoid that they are being penalized if they only prepay the taxes later this year, the tax credits for the last two quarters of 2020 are increased.
For companies, the tax credit for prepayments of corporate income taxes increases in the third quarter from 6% to 6.75% and in the fourth quarter from 4.5% to 5.25%. This measure does not apply for companies that repurchase own shares, make a capital reduction or attribute/pay dividends between 12 March and 31 December.
For the self-employed persons, the tax credit for prepayments of personal income tax increases from 2% to 2.25% in the third quarter and from 1.5% to 1.75% in the fourth quarter. Compensation
Period to incur expenses for tax shelter postponed
Belgian companies and Belgian permanent establishments of foreign companies can benefit from a tax exemption if they invest in European audiovisual works or performing arts, provided a number of conditions are met. The amount of the final tax exemption is based upon the value of the tax shelter certificate to be provided to the investors. The value of this certificate is based upon the amount of qualifying expenses the producer spends in the EER and of the direct and indirect expenses incurred in Belgium. As of the signing of the agreement between the investor and the producer, the producer has 18 months or 24 months to incur expenses. The government decided to extent this period with an addition 6 month period if the producer can demonstrate that they suffer damages as a direct result of the corona measures imposed by the government.
Deferral of tax payments
The Federal Government already announced to grant an automatic extension of the payment date for VAT and wage withholding tax of 2 months (without penalties or interest becoming due) for the months February and March. An automatic extension has now also been granted for the month of April. The payment date for the monthly VAT return of April has been extended to 20 July 2020 whereas the payment date of the wage withholding tax for the month April has been extended to 15 July 2020.
Filing deadlines postponed
The deadline for filing the VAT return and intra-community reports for the month of April is extended to 5 June 2020.
Although the deadline for filing the monthly VAT return of March has been postponed to 7 May 2020, the government now announced that the VAT return should be filed by 3 May 2020 if the VAT taxable person is entitled to a refund of its VAT credit. The VAT credit can then be refunded within the normal period.
For a complete overview of the Belgian measures see here.
Further guidance on special deferral of tax payments
The Dutch Tax Administration provided further guidance on certain aspects relating to the special deferral of tax payments.
According to the Dutch Tax Administration a request for deferral of payment for personal income tax, social security contributions, corporate income tax, payroll taxes and value added tax may be filed in one go. It is not necessary to wait until a tax assessment has been received for all these five taxes/levies. For other taxes, a request for deferral of payments has to be separately filed for each tax.
Furthermore, according to the Dutch Tax Administration a separate notification of payment inability is not or no longer needed if a request for deferral for, in particular, payroll taxes and value added tax is filed. Whether a request for deferral of payment always and automatically implies a timely filing of a notification of payment inability is not fully clear.
Please see here our Q&A for more detailed information on this subject.
Working at home
Due to the corona crisis many people are currently working from home. An agreement has been concluded with Germany for cross-border workers who work from home in their state of residence. The Netherlands and Germany have agreed that, by way of derogation from the treaty, the choice can be made for the income received during the days an employee works at home, to be considered taxable in the country of employment. The condition is that, normally, this would have been the case. This special rule only applies if the other country actually levies tax. Moreover, the employee must be able to provide a statement from his employer.
For working days on which the employee is forced to stay at home, is being paid regularly, but does not work, the Dutch and German tax authorities have confirmed that this income shall be allocated to both countries according to the ratio of days worked in the work-state / total working days as when the employee would have continued working in his normal pattern in both states. This interpretation of the tax treaty applies irrespective of the current COVID-19 period and is not limited in time.
According to the State Secretary, this interpretation also applies in relation to Belgium.
Similar agreements between the Netherlands and other countries may follow.
For a complete overview of the Dutch measures see here.
Luxembourg announces additional deadline extensions in direct tax matters
A new bill seeks to grant a one-year extension for claims whose collection is entrusted to the Luxembourg tax authorities (such as direct taxes and social security claims) that would otherwise expire by 31 December 2020. It also plans to prolong by a full year the privileged position for the Luxembourg tax authorities in the enforcement of their claims. At the same time, the bill extends several deadlines relating to tax litigation. Read more
For a complete overview of the Luxembourg measures see here.