Dutch large enterprises become eligible for the Fixed Cost Allowance pursuant to approval European Commission
As the lockdown measures are extended, the Dutch government envisages to open the Fixed Costs Allowance (TVL) to large enterprises and increase the subsidy amount significantly. On 16 March 2021, the European Commission approved the envisaged measures.
The TVL is a subsidy for companies with a loss of turnover of at least 30%. Companies in almost all sectors have access to the TVL. Certain restrictions and exclusions apply to some sectors, such as the banking sector and the agricultural sector. The TVL further provides that the company should be established and included in the Trade Register before 15 March 2020.
Determination of the subsidy amount
Enterprises should quarterly apply for the subsidy. For Q1 2021, the maximum subsidy for large companies is € 600,000. For SMEs, the maximum subsidy is € 550,000. Each enterprise/corporation with a Chamber of Commerce number should apply for the TVL on a stand-alone basis. Due to European state aid rules, the total subsidy received by the enterprise under the TVL and certain other subsidy schemes may not exceed € 1,800,000. Based on the government announcements, it is our understanding that for a group of companies this cap and the maximum subsidy amount should be applied per entity and not for the group as a whole.
For Q1 2021 the TVL requires a loss of turnover of at least 30% compared to Q1 2019 (a different reference period applies for enterprises incorporated after Q1 2019). The subsidy should be calculated on basis of the following formula: A x B x C x D.
- ‘A’ is the Q1 2019 turnover
- ‘B’ is the percentual loss of turnover (Q1 2021 versus Q1 2019)
- ‘C’ is the applicable fixed costs percentage (linked to the SBI code of the company at the Chamber of Commerce; click here for an overview (only available in Dutch))
- ‘D’ is the subsidy percentage. For Q1 2021 the percentage is 85% (for Q2 2021 the percentage is 100%)
The TVL makes use of fixed costs percentages based on sector averages determined by the CBS instead of looking at the actual fixed costs. The fixed costs should be at least € 1,500 in order to qualify for the scheme. The fixed costs are calculated by multiplying the Q1 2019 turnover (A) by the fixed costs percentage (C).
For instance, suppose a non-SME wants to apply for the TVL subsidy based on the following assumptions: (i) the Q1 2019 turnover is € 12,000,000, (ii) there is a 40% loss of turnover, (iii) the applicable fixed costs percentage is 25% and (iv) the subsidy rate is 85%. The fixed costs amount to € 3,000,000 (25% x 12,000,000) and therefore exceed the minimum threshold of € 1,500. Conclusion: the company is entitled to the maximum subsidy of € 600,000 (12,000,000 x 40% x 25% x 85% = 1,020,000).
In general, the turnover of the enterprise is determined by the amounts included in the VAT return(s). However, this may not be possible for some enterprises, for example, because the enterprise performs VAT exempt activities or is part of a fiscal unity for VAT purposes. Under such circumstances, the relevant turnover cannot be derived from the VAT tax return(s) and should be illustrated simply or clearly through the financial accounts or other 'credible evidence'.
Other COVID-19 subsidies, such as the Temporary aid scheme to maintain employment (NOW), are not included in the turnover for the TVL. On the other hand, any amounts provided under the TVL will be qualified as turnover for the purposes of the NOW. This may result in the company receiving less aid under the NOW or even in it not being entitled to receive aid under the NOW. Hence, it is advisable to check in advance whether an application for the TVL will result in a net reduction in the COVID-19 support.
Any amounts received under the TVL are not subject to personal income tax or corporate income tax. Furthermore, the TVL does not impose any restrictions on the payment of dividends and bonuses.
SMEs may already submit an application for the TVL with the Netherlands Enterprise Agency (RVO) (link; only available in Dutch). Large companies are not able to submit an application yet, but may register for updates on the opening of the proceedings (link; only available in Dutch). The government has indicated that it may take several weeks before all the extensions of the TVL have been implemented into the systems of the RVO. Enterprises may apply for the Q1 2021 TVL until 30 April 2021.
We have prepared this newsletter on the announcements made by the government. The final regulation with the exact conditions has not been published yet and may deviate.
If you have any questions or would like additional information, please contact your advisor at Loyens & Loeff.
Matthijs RavensbergenAssociate Tax lawyer
Matthijs Ravensbergen, tax lawyer, is a member of the Investment Management practice group in our Amsterdam office. He advises fund managers on the Dutch and international tax aspects of fund formation. Matthijs is a member of the FATCA & CRS team.T: +31 20 578 51 28 M: +31 613 89 65 02 E: firstname.lastname@example.org