In this EUTA Special Edition we provide an overview of the most important announced measures adopted by the European Commission as well as within our home countries Luxembourg, Belgium, Switzerland and the Netherlands. This overview is updated on a regular basis.
State Aid: Temporary Framework for State aid measures to support the economy in the COVID-19 (Coronavirus) outbreak
On 19 March 2020, the Commission issued a Temporary Framework to enable EU Member States to provide aid in order to support the economy within the framework of the existing State aid rules. The Temporary Framework is based on Article 107(3) of the Treaty on the Functioning of the European Union, which provides that State aid can be declared compatible with the common market if it remedies a serious disturbance in the economy of a Member State.
On 3 April 2020, the European Commission adopted first amendment extending the Temporary Framework to enable 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 8 May 2020, the Commission adopted a second amendment to complement the types of measures already covered by the Temporary Framework and existing State aid rules, by setting out criteria based on which Member States can provide recapitalisations and subordinated debt to companies in needThe
The Temporary Framework now provides for the following types of aid:
- Direct grants, repayable advances, tax advantages, zero interest loans, guarantees on loans covering 100% of the risk and the provision of equity, provided that (i) the aid does not exceed EUR 800,000 (gross) per undertaking, (ii) the aid is granted on the basis of a scheme with an estimated budget (i.e. individual/ad hoc aid is not covered) , (iii) the aid is granted to undertakings that were not in difficulty on 31 December 2019 but that faced difficulties or entered in difficulty thereafter as a result of the COVID-19 outbreak, (iv) the aid is granted no later than 31 December 2020. Specific conditions apply for the agricultural, fisheries and aquacultural sectors;
- State guarantees for loans taken by companies from banks, provided that the guarantee premiums have a certain minimum level, varying between 0,25% and 2% depending on the size of the company (SME or large enterprise) and duration (1-year maturity loan, 2-3 years maturity loan or 4-6 years maturity loan). EU Member States may also notify alternative schemes, whereby maturity, pricing and guarantee coverage can be modulated (e.g. lower guarantee coverage offsetting a longer maturity). Additional conditions apply, such as the condition that the guarantee is granted by 31 December 2020 at the latest;
- Subsidised public loans to companies, i.e. public loans with favourable interest rates, provided that the reduced interest rates are at least equal to the so called base rate (1 year IBOR or equivalent as published by the Commission) plus a credit risk margin, varying (again) between 0,25% and 2% depending on the size of the company and duration. Alternative schemes may also be notified. Again, additional conditions apply;
- Safeguards for banks that channel State aid to the real economy, meaning that aid in the form of guarantees and loans channelled through credit institutions or other financial institutions is not considered indirect aid to these institutions, provided that these institutions are able to demonstrate that the advantages are passed on to the largest extent possible to the final beneficiaries;
- Short-term export credit insurance where Member States demonstrate the lack of market by providing sufficient evidence of the unavailability of cover for the risk in the private insurance market.
- Support for Coronavirus related research and development (R&D) in the form of direct grants, repayable advances or tax advantages for Coronavirus and other relevant antiviral R&D. A bonus may be granted for cross-border cooperation projects between Member States.
- Support for the construction and upscaling of testing facilities in the form of direct grants, tax advantages, repayable advances and no-loss guarantees to support investments enabling the construction or upscaling of infrastructures needed to develop and test products useful to tackle the Coronavirus outbreak, up to first industrial deployment. These include medicinal products and treatments, medical devices and equipment, disinfectants, data collection and processing tools useful to fight the spread of the virus. Companies can benefit from a bonus when their investment is supported by more than one Member State and when the investment is concluded within two months after the granting of the aid.
- Support for the production of products relevant to tackle the Coronavirus outbreak in the form of direct grants, tax advantages, repayable advances and no-loss guarantees to support investments enabling the rapid production of coronavirus-relevant products (as listed under 2). Companies may benefit from a bonus when their investment is supported by more than one Member State and when the investment is concluded within two months after the granting of the aid.
- Targeted support in the form of deferral of tax payments and/or suspensions of social security contributions: to further reduce the liquidity constraints on companies due to the coronavirus crisis and to preserve employment, Member States can grant targeted deferrals of payment of taxes and of social security contributions in those sectors, regions or for types of companies that are hit the hardest by the outbreak.
- Targeted support in the form of wage subsidies for employees: to help limit the impact of the coronavirus crisis on workers, Member States can contribute to the wage costs of those companies in sectors or regions that have suffered most from the coronavirus outbreak, and would otherwise have had to lay off personnel.
- Recapitalisation aid, subject to the following conditions:
1. Conditions on the necessity, appropriateness and size of intervention: Recapitalisation aid should only be granted if no other appropriate solution is available. It must also be in the common interest to intervene, for example to avoid social hardship and market failure due to significant loss of employment, the exit of an innovative or a systemically important company, or the risk of disruption to an important service. Finally, the aid must be limited to enabling the viability of the company and should not go beyond restoring the beneficiary's capital structure to before the coronavirus outbreak;
2. Conditions on the State's entry in the capital of companies and remuneration: the State must be sufficiently remunerated for the risks it assumes through the recapitalisation aid. Moreover, the remuneration mechanism needs to incentivise beneficiaries and/or their owners to buy out the shares acquired by the State using State aid to ensure the temporary nature of the State's intervention;
3. Conditions regarding the exit of the State from the capital of the companies concerned: beneficiaries and Member States are required to develop an exit strategy, in particular as regards large companies that have received significant recapitalisation aid from the State. If six years after recapitalisation aid to publicly listed companies, or up to seven years for other companies, the exit of the State is in doubt, a restructuring plan for the beneficiary will have to be notified to the Commission;
4. Conditions regarding governance: until the State has exited in full, beneficiaries are subject to bans on dividends and share buybacks. Moreover, until at least 75% of the recapitalisation is redeemed a strict limitation of the remuneration of their management, including a ban on bonus payments, is applied. These conditions also aim at incentivising the beneficiaries and their owners to buy out the shares owned by the State as soon as the economic situation allows.
5. Prohibition of cross-subsidisation and acquisition ban: to ensure that beneficiaries do not unduly benefit from the recapitalisation aid by the State to the detriment of fair competition in the Single Market, they cannot use the aid to support economic activities of integrated companies that were in economic difficulties prior to 31 December 2019. Moreover, until at least 75% of the recapitalisation is redeemed, beneficiaries, other than small and medium-sized enterprises (SMEs), are in principle prevented from acquiring a stake of more than 10% in competitors or other operators in the same line of business, including upstream and downstream operations.
- Aid in the form of subordinated debt: this concerns debt instruments that are subordinated to ordinary senior creditors in case of insolvency proceedings. Since such debt increases the ability of companies to take on senior debt in a manner similar to capital support, aid in the form of subordinated debt includes higher remuneration and a further limitation as to the amount compared to senior debt under the Temporary Framework. If Member States want to provide subordinated debt in amounts exceeding the thresholds, all conditions for recapitalisation measures set out above will apply.
The Temporary Framework will be in place until the end of December 2020. With a view to ensuring legal certainty, the Commission will assess before that date if it needs to be extended.
Please note that EU Member States still have to notify any of the above State aid measures to the Commission for its approval. A Member State must also show that the proposed measures are necessary, appropriate and proportionate to remedy a serious disturbance in the economy of the Member State concerned and that all the conditions of the Temporary Framework are fully respected. If the Member State manages to do so, the measures can be approved very rapidly upon notification. This is illustrated by various State aid measures, which were approved by the Commission under the Temporary Framework within a very short time frame from receiving the notification. Some examples, specifically for the Loyens & Loeff home countries, include:
- Luxembourg notified a scheme (with an estimated budget of EUR 300 million) which aims at supporting companies, as well as liberal professions, affected by the economic impact of the coronavirus outbreak. The support takes the form of a repayable advance granted in one or more instalments to allow beneficiaries to face their operating costs in the difficult situation caused by the coronavirus outbreak. The scheme allows for repayable advances of up to EUR 500,000 per company;
- Luxembourg notified an additional support measure in the form of guarantees on loans. The scheme is open to all companies, except those active in the promotion, renting and sale of building as well as holding of investments. It enables the granting of guarantees on loans at favourable terms to help businesses cover immediate working capital and investment needs. The underlying loan amount per company is linked to cover its liquidity needs for the foreseeable future. The guarantees will only be provided until the end of this year and are limited to a maximum six-year duration. Companies must pay guarantee premiums as set out in the Temporary Framework;
- The Netherlands notified a EUR 23 million scheme to support Dutch providers of social support services, health care and youth care offering services at home during the coronavirus pandemic. The support, in the form of direct grants, will allow providers to purchase, lease, licence and implement e-health applications. E-health applications contribute to the continuity of support and remote care for patients that are now staying at home during the coronavirus outbreak. The measure aims at avoiding that social support, health care and youth care providers are confronted with liquidity problems due to a significant increase in demand of services at home, requiring investments in e-health applications, without a corresponding increase in financial support. The maximum aid amount does not exceed EUR 100,000 per undertaking.
- Luxembourg notified a EUR 30 million aid scheme to support coronavirus related R&D and investments in the production of coronavirus relevant products. The scheme is open to small, medium-sized and large enterprises of all sectors. Aid will be granted in the form of direct grants to enhance and accelerate research and the production of products directly relevant to coronavirus. These include medicinal products including vaccines, hospital and medical equipment including ventilators, protective clothing and equipment as well as diagnostic tools. The R&D part of the scheme covers fundamental research, industrial research and experimental development projects. The investment part of the scheme will cover 80% of the eligible costs that companies have to bear to create production capacities to manufacture coronavirus relevant products. To support quick action, companies may also benefit from a bonus when their investment is concluded within two months after the granting of the aid;
- Belgium notified to the Commission under the Temporary Framework a guarantee scheme for working capital and investment loans, to support companies active in the Flemish region and affected by the coronavirus outbreak. The measure, with a total budget of EUR 3 billion and financed by the Flemish region, aims at limiting the risk associated with issuing or restructuring loans to those companies that are most severely affected by the economic impact of the coronavirus outbreak, ensuring the continuation of activities. The underlying loan amount per company is limited to what is needed to cover its liquidity needs for the near future. Furthermore, the guarantees will only be provided until the end of this year and are limited to a maximum of six years. The guarantee fee premiums do not exceed the levels foreseen by the Temporary Framework;
- Belgium notified the Commission of its intention to set up a deferral payment measure of the concession fees owed by the Walloon airports to the Walloon authorities to support those airport operators during and after the coronavirus outbreak. The scheme will be accessible to the operators of the Charleroi and Liege airports, and will offer them the possibility to defer the payment of the concession fees that would in principle be due for the year 2020. The payment deferral may only be granted until the end of this year and its duration will not exceed six years. Furthermore, the payment deferral involves minimum remuneration in line with the Temporary Framework.
- Belgium notified a loan guarantee scheme to support companies active in the Walloon region and affected by the coronavirus outbreak. The measure, with an overall volume of guarantees to be issued of EUR 530 million, aims at limiting the risk associated with issuing or restructuring loans to those companies that are most severely affected by the economic impact of the coronavirus outbreak, ensuring the continuation of activities. The Commission found that the measure is in line with the conditions set out in the Temporary Framework;
- Belgium also notified a subordinated loan scheme to support companies, in particular start-ups, scale-ups and small/medium-sized enterprises, active in the Flemish region and affected by the coronavirus outbreak. The measure has a budget of €250 million;
Not all State aid measures which an individual Member State considers necessary in view of the COVID-19 outbreak and which are intended to remedy a serious disturbance in the economy, can at all times be brought within the scope of the Temporary Framework. Member States also propose measures which fall outside this scope and are therefore subject to the normal rules (and may take more time to review). An example:
- Belgium notified a loan guarantee scheme to support companies affected by the coronavirus outbreak. The support, in the form of State guarantees on new short-term loans, will be accessible to all companies, including small and medium-sized enterprises (SMEs) and self-employed traders. The aim of the scheme is to help businesses affected by the economic impact of the current crisis cover their liquidity needs, thus ensuring the continuation of their activities. The Commission found that the Belgian scheme is in line the principles set out in the EU Treaty and is well targeted to remedy to a serious disturbance to the Belgian economy. In particular:(i) it covers guarantees on loans with a limited maturity and size; (ii) it is limited in time; (iii) it provides for minimum remuneration of the guarantees; and (iv) and contains adequate safeguards to ensure that the aid is channeled effectively by the banks to the beneficiaries in need.
Finally, the Temporary Framework does not affect any other options which Member States have to respond to the COVID-19 outbreak without infringing the State aid rules as also described in the Commission’s Communication on the coordinated economic response to COVID-19 of 13 March 2020. Therefore:
- Member States can take measures which fall outside the scope of EU State aid control, such as measures applicable to all undertakings regarding wage subsidies, suspension of payments of corporate and value added taxes or social welfare contributions, or financial support directly to consumers for cancelled services or tickets not reimbursed by the concerned operators;
- Member States can design support measures in line with the General Block Exemption Regulation (without the involvement of the Commission);
- Member States can notify aid schemes to meet acute liquidity needs and support undertakings facing financial difficulties (also due or aggravated by the COVID-19 outbreak) on the basis of Article 107(3)(c) TFEU and as further specified in the Rescue and Restructuring State aid Guidelines;
- Member States can compensate undertakings that have been particularly hit by the outbreak (e.g. transport, tourism, culture, hospitality and retail) and/or organisers of cancelled events for damages suffered due and directly caused by the outbreak. These damage compensation measures must be notified to the Commission and will be assessed directly under Article 107(2)(b) TFEU. An example a EUR 650 million aid scheme notified by The Netherlands, of which EUR 600 million will be allocated to aid farmers and traders in the floricultural sector and companies in the specialty horticultural sector for the food-service market, who have been negatively affected by the coronavirus outbreak. The remaining EUR 50 million will be allocated to compensate potato growers affected by the outbreak. Under the scheme, these operators will be entitled to compensation for certain damages suffered. The compensation in the form of direct grants can cover a maximum of 70% of the loss of revenue or additional costs for farmers and traders in the floricultural sector and companies in the specialty horticultural sector and a maximum of 44% of the loss of revenue or additional costs for potato growers.
Updated July 2021
As from 18 March 2020, the Belgian government published various tax measures in order to deal with the economic impact of the COVID-19 crisis. Hereby an overview of the most relevant measures that have been adopted.
Compensation for mandatory closure of businesses
Update 28 April 2021
In order to mitigate the financial impact for these companies, the Flemish Government announced that businesses in the Flemish region can request a compensation. Businesses which were mandatorily closed entirely were initially entitled to a lump-sum compensation of €4,000 while businesses which could remain open on weekdays were entitled to a compensation of €2,000. Companies that are still required to remain closed after 4 April 2020, are entitled to an additional compensation of €160 per day. A compensation of EUR 2,000 is also foreseen for businesses that do not need to close but that can demonstrate that the turnover has decreased with at least 60% in a period of one month as of the reopening compared to a reference period last year. Funds are also made available in the Walloon and Brussels region for similar measures. The compensations granted in the framework of aid measures taken by the regions, communities, provinces and municipalities are, under certain conditions, exempt from taxes. This tax exemption applies until 31 December 2021. Compensations that were previously treated tax exempt but are reimbursed to the respective region shall not be considered a tax deductible expense.
Ruling on tax-free allowance for teleworking
Updated July 2021
Due to the measures taken in the fight against the coronavirus, the Ruling Commission has been willing to provide a ruling confirming that the employer can temporarily give its employees, regardless of their job category, a tax-free allowance of up to EUR 126,94 per month to cover the costs caused by teleworking, such as heating, electricity, paper, etc.
On 14 July 2020, the Belgian tax administration issued a circular letter allowing, under certain conditions, such a tax-free allowance in case of regular and structural homeworking carried out by employees, even without a ruling. If employees work at home for at least 5 working days per month, the employer may grant a lump-sum homeworking allowance of up to EUR 126.94 per month. As a result of indexation, this amount will increase to 129.48 euros per month from 1 April 2020. On 26 February 2021 the tax administration issued a new circular letter for employees who work at home which transcends the issue of home working in the context of the COVID-19 and which replaces the previous one. The circular letter foresees on the one hand a fixed office allowance covering various office expenses for a maximum of EUR 129.48 per month (to be increased to EUR 144.31 for the months April up to and including September 2021) and on the other hand a reimbursement of the purchase price of office furniture/computer equipment. For more information reference can be made to our newsletter.
Deferral of tax payments
Updated July 2021
At the beginning of the coronavirus in 2020, the Belgian government took various measures to defer the payment date for corporate income tax, personal income tax, legal entities tax, wage withholding taxes, VAT and certain excise duties. At present, no similar measures have been announced for 2021 yet.
Companies facing financial difficulties as a direct result of the Corona virus pandemic, regardless of their activity or sector, can however still request a number of tax and social security support measures from the Federal Tax Authorities, which should allow companies to bridge these temporary financial difficulties.
All Belgian registered businesses (both companies and self-employed individuals) are entitled to these measures if it can be shown that they have incurred nuisance from the spreading of the Corona virus and the correlating measures, which can be either direct (e.g. significant decrease in turnover) or indirect (as a consequence of a chain-reaction, e.g. partner companies suspending business). Companies which are in structural financial distress (i.e. companies already facing financial difficulties prior to the Corona outbreak in Belgium) can in principle not benefit from these measures.
The support measures consist of (i) a further deferral of payment, (ii) a waiver of late payment interest and (iii) a waiver of late payment fines. These measures can be requested for VAT, wage withholding tax, corporate income tax, personal income tax and legal entities tax. A company can request to apply (one or more of) these measures using a form specifically issued for this purpose and should submit a separate request for each individual debt. The form can be found on the website of the Federal Tax Authorities here. In principle, a request can only be lodged after the receipt of an assessment notice or a request for payment. Application of these measures has been extended to 31 December 2020.
It should be noted that these supportive measures are conditional upon the timely, correct and complete filing of the relevant tax return. Hence, it is of utmost importance that the relevant tax formalities (e.g. VAT return, income tax return) are duly and timely complied with.
On 5 July 2021, the tax administration announced that an individual repayment plan can still be requested for debts resulting from COVID-19. In this way, payments can be spread over up to 24 months and, in exceptional cases, 36 months. Large companies can even request an instalment plan of up to 50 months.
In addition to the above, various measures are also announced at the regional levels.
The Flemish Government has for example announced that the payment of the immovable property tax (onroerende voorheffing / précompte immobilier) for 2020 is deferred for approximately four months (i.e. until 30 April 2021) for companies active in the Flemish Region. No late payment interest will be charged for that period. The deferral is granted automatically and companies may disregard the payment term of 31 December 2020 mentioned on the assessment notice. Self-employed persons can flexibly request a payment plan and, if necessary, a waiver of interest on late payments.
In the Walloon region the regional tax payments are for example suspended as the deadlines will be extended by the period corresponding to the crisis and the registration duty for converting mortgage mandates into a mortgage has temporarily been reduced to 0%.
In the Brussels region, the Brussels Government has for example announced that it will extend the two-month payment term for immovable property tax and road tax with an additional two-months and that the registration duty for converting mortgage mandates into a mortgage will temporarily not be collected.
For some additional measures regarding the payment of registration duties, reference is made to the section ‘Filing deadlines postponed’ below.
Following the federal decisions to prevent the coronavirus, cities and municipalities also provide support measures for the self-employed and entrepreneurs affected. A compilation of a.o. the fiscal measures of the Flemish cities and municipalities can be found on the website of VVSG here. However, it is recommended to have a look at the website of your municipality.
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.
The measure shall apply to prepayments relating to a taxable period ending between 30 September 2020 and 31 January 2021 included.
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%.
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.
This measure does not apply to:
- companies that repurchase own shares, make a capital reduction or attribute/pay dividends between 12 March and the end of the relevant period;
companies that pay a variable remuneration between 12 March 2020 and the end of the relevant period to the main representative of the executive directors, to the chairman of the executive board, to the main representative of the other persons in charge of the management or to the main representative of the persons in charge of the daily management;
- taxpayers that hold a direct participation between 12 March 2020 and the end of the relevant period in companies that are established in certain tax haven countries;
- taxpayers that pay amounts of € 100,000 or more between 12 March 2020 and the end of the relevant period to companies established in certain tax haven countries if it is not demonstrated that these payments were made in the context of an actual and genuine transaction
Abolition of December advance payment for VAT and wage withholding tax
Update April 2021
VAT taxable persons filing periodical VAT returns (i.e. monthly or quarterly VAT returns) are no longer required to pay the advance payment of the VAT normally due for the month December or for the last quarter in December of that year. As a result, the VAT due on the transactions carried out in December respectively Q4 of a given year shall only have to be paid to the Belgian State by the 20th of January of the following year. The December advance payment has equally been abolished for the wage withholding tax.
Filing deadlines postponed
Update 10 February 2021
In 2020 the Belgian tax authorities allowed various extensions for the filing deadline of income tax returns, VAT returns, IC sales listings, annual client listing and CRS/FATCA reporting. It remains to be seen whether similar administrative tolerances will be granted in 2021. For VAT related filings, there are currently no extensions foreseen for 2021.
Update 15 January 2021
Due to the security measures in place in Belgium in relation to the second wave of the coronavirus (as of 1 November 2020), notary offices and citizens are not always able to complete all (tax) formalities on time. The Flemish Tax Administration therefore provides, as a general measure, an extension of the deadline until 30 April 2021 if the deadline would normally expire between 1 November 2020 and 30 April 2021. It is not necessary to apply for this postponement. This implies that:
- no tax increase for a late inheritance tax return will be imposed if this tax return is filed no later than 30 April 2021. If, for example, an inheritance tax return should have been filed by 28 November 2020 at the latest, this deadline is now extended to 30 April 2021.
- no tax increase will be imposed if the period within which a deed must be submitted for registration is exceeded. If, for example, two parties agree to sell an immovable property and this sale should be registered by authentic deed on 28 November 2020, this deadline is now extended to 30 April 2021. In addition, the period of time to comply with the conditions to maintain a favourable regime is extended until 30 April 2021 as well.
This also implies that the payment of the registration duties can be postponed to the same extent
Deferral of DAC6 reporting obligation
On 25 May 2018, the Council of the European Union (the Council) adopted the Mandatory Disclosure Directive ((Directive (EU) 2018/855), also known as DAC6). DAC6 introduces mandatory disclosure rules for EU-linked intermediaries and – under certain circumstances – taxpayers. As follows from the Directive, arrangements of which the first step is implemented between 25 June 2018 and 1 July 2020 must be reported before 31 August 2020. From 1 July 2020 onwards reporting is required within 30 days. In view of the COVID-19 situation, and in view of a political agreement reached between the EU Member States on an (optional) postponement of this obligation, the Belgian tax authorities decided to grant a postponement of 6 months by way of an administrative tolerance. Concretely, this results in the following deadlines for the notifications to be made to the Belgian competent authority:
- The reportable cross-border arrangements of which the first step is implemented between 25 June 2018 and 1 July 2020 have to be reported before 28 February 2021.
- The 30-day reporting period starts on 1 January 2021 for:
- Reportable cross-border arrangements being made available for implementation, being ready for implementation, or when the first step in the implementation has been made between 1 July 2020 and 31 December 2020;
- Intermediaries that have directly or indirectly provided aid, assistance or advice with respect to designing, marketing, organising, making available for implementation or managing the implementation of a reportable cross-border arrangement between 1 July 2020 and 31 December 2020.
- The first periodic report in respect of “marketable” arrangements should be submitted on 30 April 2021 at the latest.
This delay applies to federal taxes and regional taxes for which the Belgian tax administration is responsible. For Flemish taxes, such as Flemish inheritance taxes and certain registration duties, a similar delay has been granted by the Flemish tax authorities.
At the end of January 2021 a further delay was announced: arrangements to be reported during the months of January and February 2021 should be reported by 28 February 2021. The penalties provided for non-timely submission will not be applied during this period.
Loss-carry back temporarily allowed due to corona
Update 24 July 2020
In principle, tax losses can only be carried forward and no carry-back to previous tax years exist in Belgium. However, in order to improve the cash position of businesses and companies, a one-time possibility is introduced to carry-back the losses incurred during the COVID-19 crisis to compensate the taxable profits of the previous financial year.
The loss incurred in the COVID-19 year should be estimated prudently as an over-estimation will result in a (non-tax deductible) tax increase (personal income tax) or in a (non-tax deductible) separate assessment (corporate income tax) becoming due.
Self-employed persons and businesses subject to personal income tax are allowed to carry back the loss expected in income year 2020 due to the corona crisis to income year 2019. The loss-carry back takes the form of an ‘economic exemption’ which needs to be claimed through a separate form since tax return form has ready been published in the Belgian Gazette. The exemption cannot result in a negative outcome. The amount that has been exempt is added to the taxable basis in 2020 (assessment year 2021) in order to avoid a double deduction of the same loss.
The following taxpayers are excluded from this rule:
- Enterprises that were already in difficulties according to art 2, §1, 4/2 when corona started (i.e. on 18 March);
- Taxpayers that are taxed on lump sum taxable basis.
Companies will be able to off-set the estimated loss incurred in the subsequent (i.e. the COVID-19) year from the taxable profit realised during a financial year closing between 13 March 2019 and 31 July 2020. Technically, the taxable reserves in the corporate income tax return are reduced for the amount of the estimated loss through the creation of a tax exempt reserve. The exemption cannot be higher than the adjusted result of the taxable period with an absolute max of 20mio€.
The amount that has been exempt is added to the taxable basis (through an increase of the taxable reserve) in the subsequent COVID-19 year in order to avoid a double deduction of the same loss. In addition, the taxable basis will be increased (through a disallowed expense) if the amount of the exemption is taxed in a subsequent year at a lower tax rate than the rate applicable at the moment the estimated loss was used to off-set the taxable basis. This measure was introduced in order to neutralize the benefit of this lower tax rate.
The following companies are excluded from the rule:
- Companies that distribute a dividend, repurchase own shares or perform a capital (or similar) reduction between 12 March 2020 up to and including the filing of the CIT return in relation to assessment year 2021;
- Companies subject to a special tax regime;
Companies that hold a direct participation between 12 March 2020 up and including the filing date of the CIT return in relation to assessment year 2021 in a company established in certain tax haven countries;
- Companies that pay amounts of € 100,000 or more between 12 March 2020 up and including the filing date of the CIT return in relation to assessment year 2021 to companies established in certain tax haven countries if it is not demonstrated that these payments were made in the context of an actual and genuine transaction;
- Companies that were already in difficulties according to art 2, §1, 4/2 when corona started (i.e. on 18 March).
Update 2 December 2020
Companies are allowed to (temporarily) exempt part of their profits realised in assessment years 2022, 2023 and 2024 by booking these profits to an exempt "reconstruction reserve" for the purpose of strengthening their solvency and equity position which was affected by the COVID-19 crisis. This reconstruction reserve thus allows future profits to be treated in a fiscally advantageous manner, provided certain conditions are fulfilled. The maximum amount that can be placed on a reconstruction reserve is the operating loss in financial year ending in 2020 with an absolute max. of 20 m€. Companies ending the financial year between 1 January 2020 and 31 July 2020 may choose to apply the operating loss in the financial year ending in 2021. Per taxable period the amount that can be transferred to the reconstruction reserve is limited to the taxable reserved profit not taking into account tax exempt reconstitution reserve.
- The measure does not apply to:
Companies that distribute a dividend, repurchase own shares, perform a capital (or similar) reduction or reduce equity in another manner between 12 March 2020 up to and including the filing of the CIT return in relation to the assessment year in which the reconstruction reserve was accounted for;
- Certain companies subject to a special tax regime;
- Companies that were already in difficulties according to art 2, §1, 4/2 ITC when corona started (i.e. on 18 March 2020).
The reconstruction reserve only remains tax exempt if:
the reconstruction reserve is accounted for and maintained in a separate reserve account;
- The company does not hold a direct participation in a company established in certain tax haven countries between 12 March 2020 up and including the last day of the taxable period in which the reconstruction reserve is benefitted from;
- The company does not pay amounts of € 100,000 or more to companies established in certain tax haven countries between 12 March 2020 up and including the last day of the taxable period in which the reconstruction reserve is benefitted from (unless it is not demonstrated that these payments were made in the context of an actual and genuine transaction).
The reconstruction reserve becomes (wholly or partially) taxable in the taxable period where the equity drops (i.e. where the company repurchase own shares, distributes a dividend or performs a capital reduction in that taxable period) or the employment level drops (i.e. if the amount in the account 62 (salaries) is lower than 85% of the amount in this account on the last day of the financial year ending in 2019).
Base rate investment deduction temporarily increased
Update January 2021
The investment deduction is a tax deduction that comes on top of the deduction of the depreciation of eligible assets. In order to benefit from the investment deduction, certain conditions need to be fulfilled. The one-time investment deduction is calculated as a percentage of the acquisition value related to the investments. The base rate for investments by small and medium-sized enterprises (SME) is 8 percent. In order to encourage investments by these enterprises, this base rate was increased to 20 percent calculated on the acquisition or investment value of fixed assets acquired or created between January 1, 2018 and December 31, 2019. Due to the COVID-19 outbreak and in order to stimulate investments in these difficult times, the base rate is set at 25% for investments made between 12 March 2020 and 31 December 2020. This measure has meanwhile been extended for investments made prior to 31 December 2022.
If the company has no sufficient taxable basis to use this investment deduction, this one-time investment deduction for SME’s can in principle only be carried forward for one year. Due to the negative financial impact of COVID-19, companies that could not (fully) use the investment deduction in relation to investments made in the period 2019-2021, will likely not be able to use any unused investment deduction in the subsequent year. For the investments made until 31 December 2021, the unused investment deduction can therefore exceptionally be carried forward for two years instead of one year.
Update 24 July 2020
In order to support certain sectors, employers have the possibility to grant consumption vouchers to their employees. These vouchers will be tax exempt in the hands of the employees and – contrary to other vouchers – fully tax deductible in the hands of the employer. More information regarding the conditions and the duration can be found in two Circular letters issued by the Tax Administration on 22 October 2020 and 12 March 2021 (Circular letter no. 2020/C/131 and Circular letter 2021/C/25 ).
Period to incur expenses for tax shelter postponed
Update July 2021
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 in principle has 18 months or 24 months to incur expenses. In order to support this sector, some additional measures have been taken as well, such as the possibility to change the agreement in order to designate another work or art, the possibility for investors with liquidity problems to partially forego their investment or to postpone their payment with three months and more flexibility regarding the periods in which the expenses can be made for agreements concluded until 30 September 2021.
Flexibility on recording a bad debt reserve
Bad debt reserves that are recorded during the financial year and relate to a loss that is not certain but probable, can only be treated tax exempt (i.e. are only tax deductible) if certain conditions are met. This implies a.o. that the debtors to which the loss relates should clearly be individualized. The probability of the loss should moreover appear from special events that took place during the taxable period and are still present at the end of this period. General or fixed bad debt reserves do not comply with these conditions.
A circular letter was issued on 23 March 2020 by the Belgian Tax Authorities stating that the coronavirus constitutes a special event that justifies the recording of a bad debt reserve if a debtor does not pay its invoice as a result of the measures taken by the Government. Each debtor should still be assessed separately but flexibility may be applied when assessing the difficulties for recovering outstanding debts from debtors whose turnover has significantly decreased as a result of the restrictive measures imposed by the federal government.
International measures for certain employees living cross-border and working at home
Update July 2021
Although income from employment is generally taxable in one’s “home” state, employees which are active in a cross-border context (e.g. Dutch residents working in Belgium or vice-versa) are often taxed in the country in which they are economically active (the “work” state), provided that a minimum amount of the (professional) time is effectively spent in that country (specific conditions apply depending on the country in question).
Considering the general advice of the Belgian (and foreign) authorities to telework to the largest extent possible, the period spent in the work state by these employees could significantly decrease, which could potentially limit the work state’s right to tax the professional income, or even entirely shift this right to tax to the home state of the employee concerned. It is thus very important to keep record of the days that the employee(s) concerned have worked from their home office, in order to assess any changes to the applicable tax regime.
Specific agreements have been made regarding employees commuting between Belgium on the one hand, and Germany, France, Luxembourg or the Netherlands on the other hand.
Belgium and the Netherlands have agreed that - for the purposes of the application of article 15, § 1 of the double tax treaty concluded between Belgium and the Netherlands - working days for which remuneration was received and on which the employee worked at home solely because of measures taken by the Dutch or Belgian government to fight the COVID-19 pandemic, are deemed to be spent in the Contracting State in which the employee would be employed without these measures. This fiction cannot be applied to working days which, independently of these measures, the employee would have spent at home or in a third state. In particular, it cannot be applied by employees who, in accordance with their employment contract, generally exercise their employment from home. Employees who use the fiction are obliged to apply it in a consistent manner in both Contracting States and to maintain evidence (e.g. a written confirmation from the employer with respect to the days that an employee has been working at home due to the COVID-19 measures). This fiction can only be applied to the extent that the salaries for the days that were spent working at home are effectively taxed by the normal work state. The agreement is effective as of 11 March 2020 until 30 September 2021. The agreement also contains provisions with respect to payments that an employee receives during a temporary unemployment.
On 6 May 2020, a similar fiction is agreed upon between Belgium and Germany concerning article 15, § 1 of the Belgian-German double tax treaty for the days that an employee is working at home as a result of the COVID-19 measures taken by the Belgian and German Governments. Similar conditions apply. The agreement applies until 30 September 2021.
Article 11, § 1 of the Belgian-French double tax treaty provides that salaries, wages and other similar remuneration are taxable only in the Contracting State on whose territory the personal activity, which is the source of such income, is exercised. On the basis of the rules on frontier workers laid down in the additional Protocol to this double tax treaty, the salaries, wages and other similar remuneration of a French employee working in the Belgian frontier zone are in principle taxable in France (i.e. the State of residence) if the employee has a permanent home exclusively in the frontier zone of France. However, there are several conditions that have to be met. One of the conditions is that the French frontier worker must not leave the Belgian frontier zone for more than 30 days per calendar year in the physical exercise of his/her activity. Article 7(b) of the Protocol contains a list of cases which are not taken into account for the application of this 30-day rule, including cases of force majeure beyond the control of the employer and the employee. Already on 13 March, the Belgian and French authorities agreed that the COVID-19 situation will be such a case of force majeure as of 14 March 2020. As a result, the presence of a French frontier worker in his place of residence in France (in particular to telework there) will not be taken into account for the calculation of the 30-day period. The measure applies until 30 September 2021. This agreement concerns only the French frontier worker but does not provide a solution for other employees working from home. That is why Belgium and France also agreed on 15 May 2020 to give all other employees resident in a Contracting State who habitually carry out their activity (full-time or part-time) in the other State the possibility of using the same fiction as mentioned above (under similar conditions). This possibility applies from 14 March 2020 until 30 September 2021.
Employees commuting between Belgium and Luxembourg are taxable on their professional income in the work state if any professional activity physically carried on outside this work state is limited to a period of maximum 24 days, unless force majeure can be shown. In light of the current limitations on travel, the Belgian and Luxembourg authorities have expressed their intention to qualify the present situation as such force majeure: the period spent by the employee in his home state for the purpose of teleworking, will not be considered for the calculation of the aforementioned 24-day limitation. In addition, an agreement has been reached on 19 May 2020 between Belgium and Luxembourg that is similar to the agreement that Belgium concluded with the Netherlands, Germany and France for other employees that work cross-border. The agreement applies from 11 March 2020 to 30 September 2021.
On 17 June 2020, the Belgian tax authorities published FAQ on the impact of corona on cross-border employment which can be viewed here. According to the FAQ, home working days due to the pandemic are not disregarded for employees residing in Belgium and generally working in another country than France, Germany, Luxembourg or the Netherlands. Hence, the former country of work may not keep its taxation right.
Flexibility on the application of the grandfathering clause under the new interest limitation rule
With effect from 1 January 2019, Belgium introduced a new interest limitation rule in line with the Anti-Tax Avoidance (ATAD). According to this rule, any “exceeding borrowing costs” are only tax deductible up to the maximum of 30% of the taxpayer’s EBITDA or EUR 3 million. A Grandfathering was introduced for existing loans: loans that are concluded prior to 17 June 2016 are excluded from this rule if no essential changes have been made on or after this date. Essential changes include a.o. a change in the parties, the interest rate, the duration or the amount borrowed.
The exceptional situation caused by Covid-19 and the measures imposed in that respect by the federal government will inevitably have an adverse effect on the liquidity and solvency of some companies. In this context, specific payment methods (e.g. a deferral of interest or capital payment) may be authorised for certain loans. A circular letter now clarifies that the authorisation of specific payment arrangements for loans concluded before 17 June 2016 should not be considered as a fundamental change when:
- the taxpayer can demonstrate that the payment problems are the result of the crisis caused by COVID-19, and
- the terms of payment appear in an approved application to a financial institution or are included in a supplementary agreement.
In other words, these loans will be able to continue to benefit from the grandfathering rule.
These payment problems, which are the result of a general liquidity and solvency problem, may be reflected in particular in a fall in turnover or activity, temporary or total unemployment among staff or temporary closure as a result of the measures imposed by the federal government as part of the fight against COVID-19.
Tax credit for remission of rent
Update July 2021
A landlord who grants a (partial) remission of rent to his tenant may enjoy a tax advantage if amongst others the following conditions are met:
- at least 40 % of the rent for the months March, April and May 2021 is waived;
- the tenant is a self-employed person (in the main profession), a small company or a small association; and
- the tenant had to close its business due to the measures imposed by the federal government as a result of the covid-19 pandemic.
If the conditions are fulfilled, a tax reduction of 30% of the remitted rent can be claimed. A maximum of €5,000 per month per lease can qualify for the tax reduction and a maximum of €45,000 per landlord. For corporate income tax purposes, the benefit is granted in the form of a non-refundable tax credit.
The waiver must be laid down in a written agreement between the tenant and the landlord. The tax administration has provided a model agreement that can be consulted here. The agreement should be sent to the tax administration on 15 June 2021 at the latest.
In order to further assist companies in the sectors that are obliged to close for a longer period, a new Bill has been approved that grants the same tax advantage for the rent that is voluntarily waived for the months of of June, July, August or September 2021. Unlike the tax benefit for the months April up to June, this measure requires that, in the month for which the rent is waived voluntarily, the enterprise has had to close for at least one day on a mandatory basis.
The question can be raised whether such remittance can qualify as an abnormal or benevolent advantage. The Minister of Finance confirmed in a Parliamentary Question that no advantageous or benevolent advantage is present in case the rent is partially or wholly remitted because a taxpayer is forced to close its business due to the pandemic. Whether the cost associated with the remittance is tax deductible for the landlord depends on the circumstances. However, if the landlord remits the rent in order to obtain or maintain taxable income, a condition that is in principle fulfilled according to the Minister, this cost can be considered tax deductible.
If the addendum to the rental agreement stipulates that the tenant does not have to pay rent during one of the periods of mandatory closure, the waiver is the simple application of the addendum and the waived rent should – according to the accounting standards committee - not be recorded.
Measures to stimulate the donation of medical supplies and computers
Updated 24 July 2020
The Belgian Government has asked all Belgian civilians and companies to donate their medical material and supplies to hospitals, in order to cover possible shortages.
In this respect one should know that taxable persons who deducted VAT on the manufacturing or purchase of items donated for free are in principle obliged to adjust the deducted VAT via a self-supply subject to VAT. This additional VAT cost could discourage companies from donating medical supplies.
For this reason, the Belgian VAT authorities have now decided that a donation of medical supplies to hospitals will not lead to a VAT adjustment. This measure will apply to supplies made since 1 March 2020 up until 1 September 2020.
The aforementioned tolerance applies to the following goods:
- Medical devices as referred to in Royal Decree 18 March 1999 (e.g. instruments intended for diagnostic and therapeutic purposes, devices intended for clinical research, …)
- Protective equipment for healthcare workers and patients (mouth mask, protective clothing, disinfectants, …)
Please note that the measure does not apply to the donation of pharmaceutical drugs.
The medical supplies must be donated to one the following institutions:
- Healthcare institutions as referred to in the coordinated law of 10 July 2008. Pursuant to this law, hospitals must meet certain standards and must be approved / recognized by the FPS Public Health (this concerns in particular those institutions whose medical care services normally fall within the scope of the exemption envisaged by Article 44, § 2, 1°, a) of the VAT Code);
- Associations of hospitals as referred to in Royal Decree 25 July 1997;
- Hospital groups as referred to in Royal Decree 30 January 1989;
- Mergers of hospitals as referred to in Royal Decree 31 May 1989: and
- Locoregional clinical hospital networks as referred to in the law of 28 February 2019.
- Certain institutions mentioned under article 44, §2, 2° of the Belgian VAT Code:
- Certain institutions mentioned under article 44, §2, 2° of the Belgian VAT Code:
- Retirement homes
- Homes for people with a disability
- Schools and universities
- Humanitarian aid organizations (for their interventions relating to COVID-19)
- Approved institutions referred to in Regulation 2020/491
- Other government institutions
In order to benefit from this VAT measure, the company should be able to provide proof that the medical supplies were donated free of charge to one of the institutions mentioned above. The proof must consist of a document in which the hospital confirms that the donated medical supplies were used to provide care or were donated to another institution.
In addition, this document must be drawn up in twofold for each donation, dated and signed by both parties and should contain the following details:
- Name, address and VAT number of the benefactor;
- Name, address and company number of the beneficiary;
- Complete description of the donated goods; and
- Amount of goods.
This document replaces the document required by article 3 of Royal Decree n° 1, which establishes that business assets were used for other purposes than the economic activity by the benefactor.
It should also be noted that the following guidelines apply for the aforementioned document:
- Multiple donations can be merged by mentioning the different types of medical supplies and their amount. The benefactor can even replace the complete description of the donated goods by attaching the original receipt for the medical supplies to the document.
- One summarizing document / overview containing all the donations of one month will also be accepted by the VAT authorities, if the summarizing document is drawn up before the 15th day of the following month and reference is made to the month in which the medical supplies were actually donated.
- It is not required to register this document in the accounts of the benefactor, but it should be kept in case of VAT-audit.
In order to mitigate shortages of computers in Belgian schools, a similar measure was adopted to stimulate the donation of computers to schools established in Belgium. The same documents are required as for donations of medical supplies. This measure will also apply for supplies made since 1 March 2020 up until 31 December 2020.
Income tax consequences
Update 24 July 2020
If the donator is subject to corporate income taxes (resident and non-residents) or is subject to personal income tax (residents/non-residents) as a self-employed person, the donation of the above mentioned medical goods done between 1 March 2020 and 31 July 2020 will not qualify as an abnormal or benevolent advantage and the costs associated with the donated medical goods will be tax deductible. A similar measure is introduced for donations of computers to schools established in Belgium between 1 March 2020 and 31 December 2020.
Please note that other natural persons subject to personal income tax (resident/non-resident) that donate these medical goods and computers to certain institutions can exceptionally and temporarily receive an increased tax deduction.
Reduced 6% VAT rate (instead of 21%) on the supply, intra-Community acquisition and import of certain PPE’s
In order to stimulate the supply of goods which are required to comply with the preventive measures in the fight against the COVID-19 pandemic, the Federal Government has decided to temporarily apply the reduced VAT rate of 6% (instead of the standard VAT rate of 21%) on the supply, intra-Community acquisition and import of:
- face masks, classified under the CN codes 4818 90 10 00, 4818 90 90 00, 6307 90 98 10, 6307 90 98 91, 6307 90 98 99 and 9020 00 00 10. As from 1 January 2021 the combined customs nomenclature has changed with an impact on the classification of face masks. As from this moment, this measure applies to face masks classified under the following CN codes: 4818 9010 00, 4818 9090 00, 6307 9010 00, 6307 9093 11, 6307 9093 19, 6307 9093 20, 6307 9093 90, 6307 9095 11, 6307 9095 19, 6307 9095 20, 6307 9095 91, 6307 9095 95 and 9020 0010 90, and
- hydro alcoholic gels classified under the CN codes 2207 20 00, 3808 94 10, 3808 94 20 and 3808 94 90.
This measure will apply as from 4 May 2020 until 31 December 2020. This period has been further extended, and accordingly will also apply to all supplies, intra-Community acquisitions and imports of the abovementioned goods for which VAT becomes due as from 1 January 2021 until 30 June 2021 (see Circular letter no. 2021/C/39 of 3 May 2021).
This national measure complements the European Commission’s decision – in the fight against COVID-19 – to temporarily waive customs duties and VAT for State bodies and charitable organizations when importing medical devices and protective equipment from third countries.
VAT exemption for supplies of medical equipment to public bodies and certain organizations
The European Commission already decided to waive VAT and customs duties on imports of necessary medical equipment destined for distribution free of charge by State bodies or approved organizations through its decision of 3 April 2020. With its decision of 28 October 2020, the European Commission has extended the application of this measure until 30 April 2021.
VAT exemption for COVID-19 vaccines and testing kits
The Council has adopted amendments to the VAT Directive to allow EU Member States to temporarily exempt COVID-19 vaccines and testing kits, as well as closely related services, from VAT when sold to hospitals, medical practitioners and individuals.
This measure only concerns COVID-19 vaccines which have been authorized by the Commission or by the EU Member States and COVID-19 testing kits that comply with the applicable EU legislation.
The measure will apply until 31 December 2022.
EU Member States may also apply a reduced VAT rate to testing kits and closely related services, if they choose to do so (instead of a zero rate). This possibility was already available for vaccines.
The Belgian Minister of Finance has in this respect decided that COVID-19 vaccines and in vitro diagnostic medical devices for this disease are subject to a 0% VAT rate. This measure applies as from 1 January 2021 until 31 December 2022.
The supply, intra-Community acquisition and import of the following goods is subject to the 0% VAT rate (see Circular letter no. 2021/C/3 of 11 January 2021):
- COVID-19 vaccines that have been granted a European market authorization and are registered as medicines by the Minister of Public Health, and
- Diagnostic tests for this disease, such as PCR tests (nucleic acid test) and antigen tests via a sample taken from the nose, serological tests via blood sampling and (antibody) self-testing. The diagnostic tests must meet the requirements of the EU in the field of medical devices for in vitro diagnostics (see a.o. Directive 98/79/EC of the European Parliament and of the Council of 27 October 1998 on in vitro diagnostic medical devices and Regulation 2017/745 of the European Parliament and of the Council of 5 April 2017 on medical devices, amending Directive 2001/83/EC, Regulation (EC) No 178/2002 and Regulation (EC) No 1223/2009 and repealing Council Directives 90/385/EEC and 93/42/EEC).
This 0% VAT rate also applies to services which are closely linked to the aforementioned vaccines and medical devices (e.g. taking the test, analysis of the test at the assigned lab, administering a vaccine). This means that no VAT shall be due on the services of medical, paramedical, pharmaceutical and support staff in the vaccination centers.
The Minister of Finance has also decided that the provision of personnel by a city, municipality or CPAS to a first-line zone in the context of the organization and operation of vaccination centers can also take place under the 0% VAT rate (and so that no VAT would be due).
Hairdressers – modification to the calculation of the VAT forfeit for Q4 2020
Update 21 December 2020
Men, women and men-women hairdressers can benefit from a modification to the calculation of their forfeit to adapt their turnover to the corona crisis.
The number of type services that should be taken into account on the calculation sheet for 2020 (box II) that serves as a base for the VAT return related to Q4 2020 are:
- For men: 307 instead of 1140
- For women: 144 instead of 534
Deduction of input VAT on costs relating to cars which are used for both private and professional purposes (company cars)
Due to the exceptional situation created by the Covid-19 lockdown and mandatory teleworking, the semi-flat rate (semi-forfaitaire) calculation method for the deduction of input VAT on costs relating to cars which are used for both private and professional purposes (calculation method 2) is distorted.
Therefore, the VAT authorities allow taxable persons who normally apply calculation method 2 to deduct input VAT on the basis of the general flat rate of 35% (calculation method 3). Taxable persons can also combine calculation method 2 and calculation method 3 for multiple cars, despite this in principle being prohibited. The other application conditions for methods 2 and 3 remain of course in place.
It is important to note that these measures only apply to calendar year 2020.
As of 2021, the taxable persons concerned (who applied calculation method 3 or a combo of calculation method 2 and 3) can again switch to calculation method 2.
Temporary reduced rate for the fine and interests on late payment of VAT
Update May 2021
As a one-off support measure for businesses, the interest on the late payment of VAT debts is reduced to 4% per year (instead of 9,6%) during the second quarter of 2021 (i.e. 1 April until 30 June 2021). In addition, the proportional fine for the late payment of VAT has been reduced from 15% to 10% during the same period (i.e. Q2 of 2021).
Reduced thresholds for VAT refund
Update May 2021
In order to mitigate potential liquidity issues for taxable persons as a result of the Covid-19 restrictions, the thresholds for the refund of deductible VAT amounts exceeding the VAT amount due as shown in the periodic VAT returns, have been reduced. Contrary to other VAT related Covid-19 relief measures (excl. the abolishment of the December advance payment), this measure is permanent and has entered into force on 1 April 2021.
The reduced refund thresholds apply to all taxable persons with a right to deduct input VAT who file monthly or quarterly VAT returns. In addition to reaching the new threshold, the VAT return must in any case be submitted by the 20th of the month following the period to which the VAT return relates and the box ‘refund request’ should be ticked in the VAT return concerned in order to get a reimbursement of the outstanding VAT credit.
The new VAT refund thresholds are:
- EUR 50 (instead of EUR 245) if the VAT refund is requested in the VAT return relating to the last month or quarter of the calendar year;
- EUR 400 (instead of EUR 615) if the VAT refund is requested in the VAT return relating to one of the first three quarters (of the calendar year) by a taxable person who files quarterly VAT returns;
- EUR 400 (instead of EUR 1.485) if the VAT refund is requested in the last monthly VAT return of one of the first three quarters (of the calendar year) by a taxable person who files monthly VAT returns;
- EUR 50 (instead of ERU 245) if the VAT refund is requested by a taxable person filing monthly VAT returns and holding an authorization for monthly refund of its VAT credit; or
- EUR 50 (instead of EUR 245) if the VAT refund is requested by the taxable person-starter (i.e. within 24 months as from the date on which he commenced its activity) filing monthly VAT returns.
Temporary reduced VAT rate for restaurant and catering services
Update May 2021
As most hotels, restaurants and bars were closed since October 2020, the VAT rate for certain restaurant and catering services has been reduced to 6%.
The reduced VAT rate specifically applies to all services whereby foods and/or drinks (incl. alcoholic beverages) are provided to customers for on-site consumption. This includes regular bars and restaurants (including bars and restaurants in hotels, offices or sport clubs), food trucks and caterers.
The reduced VAT rate is applicable for all restaurant and catering services for which VAT becomes due from 8 May until 30 September 2021.
The Dutch government has published emergency measures to support Dutch businesses dealing with the COVID-19 crisis.
Significant measures are:
- Special deferral of payment obligations for inter alia corporate income tax, personal income tax, wage tax, value added tax, excises and consumer taxes;
- Revision of provisional 2020 corporate income tax or personal income tax assessments;
- Temporary reduction of recovery interest and tax interest rates from 4% and 8% respectively to 0.01%;
- Special COVID-19 tax reserve;
- Postponement implementation date legislative proposal 'excessive current account debts of substantial shareholders';
- Reduction customary wage income of substantial shareholders;
- Increased 2020 budget for tax-free employment costs
- Partial deferral of payment for energy tax, renewable energy surcharge and value added tax for certain enterprises;
- Relief of certain conditions for lower unemployment insurance contributions; and
- Upcoming new regulations for compensation for wage costs of employees under which an allowance of up to 90% of wage costs can be granted.
Most of the announced measures are of a temporary nature and will in principle be in force until 1 October 2020. This period may be extended.
Deferral of tax payment obligations and revision of provisional assessments
The special deferral of tax payment and the revision of provisional tax assessments are existing arrangements of which the application will be temporarily simplified. In addition, these measures are boosted due to the simultaneously announced reduction of both the recovery interest and the tax interest from rates of 4% and 8% respectively to a rate of 0.01% on an annual basis.
Special deferral of tax payment obligations
Businesses facing liquidity issues as a result of the COVID-19 impact, can request a special deferral of payment obligations for many taxes, inter alia corporate income tax, personal income tax, wage tax, and value added tax. Please note that dividend tax explicitly has been excluded.
Once a tax return has been filed by the taxpayer and the Dutch Tax Administration have issued a tax assessment, the request for special deferral of tax payment obligations can be filed with the Dutch Tax Administration in writing or through a digital portal. The request for deferral of payment for payroll taxes and value added tax must be filed once the additional tax assessment is received.
It is sufficient to state in the request that the COVID-19 crisis is the reason for the payment inability. Mentioned deferral will be granted automatically for three months. No expert statement is required for this three months period. A single request covers all upcoming tax assessments that will be issued during the three months period. No deferral will be granted if this would be against the interests of the Dutch state (e.g. in case of abuse).
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.
An extension of the deferral after three months is possible, but has to be done in writing and will be subject to an information request from the Dutch Tax Administration. If the amount(s) deferred exceed(s) EUR 20,000, an expert opinion should be provided. The external expert will have to state that it is likely that:
- there are real liquidity issues at the moment of the request or shortly thereafter; and
- these liquidity issues are mainly caused by the COVID-19 crisis.
In addition, the request needs to include a liquidity forecast that is plausible according to the external expert.
Further, it has been announced that a statement from the taxpayer will be required asserting that during the extended period of deferral no dividend distributions will be made, no share repurchases will take place and no bonuses will be granted. More detailed information about the required content of this statement will be published by the government shortly.
Please note that a special deferral of tax payment obligations is also available to customs duties, albeit different conditions apply.
A request to defer tax payment obligations qualifies in certain situations as a notification of payment inability. Such notification of (expected) payment inability in advance can be required and avoids, if timely filed, reversal of the burden of proof with regard to director liability. This applies to wage tax, value added tax, excises and some other mainly indirect taxes.
Reduction recovery interest rate to 0.01%
The recovery interest rate will be reduced from 4% to 0.01% on an annual basis. This measure will take effect on 23 March 2020 and will apply to all taxes due. The temporary reduction in principle lasts until 1 October 2020. For situations where the taxpayer is entitled to recovery interest, the 4% interest rate remains applicable.
No payment default penalty
The Dutch Tax Administration will not impose penalties for late payments of wage tax or value added tax as of 12 March 2020. Penalties for late payment that already have been imposed, will be annulled.
Revised provisional 2020 tax assessments
Businesses that expect a lower or higher taxable profit for 2020 due to the impact of the COVID-19 crisis can request a revised provisional corporate or personal income tax assessment for 2020. A refund will be provided if the revised tax assessment is lower than the taxes that have already been paid in the first months of 2020.
Reduction tax interest rate to 0.01%
The tax interest rate will be reduced to 0.01% on an annual basis (currently 8% for corporate income tax and 4% for other taxes). As a result, the risk of tax interest due to a misjudged estimate of the expected taxable profit should be remote. The temporary rate reduction will be effective as of 1 June 2020 for all taxes except for personal income tax, for which it will be effective as of 1 July 2020, and lasts in principle until 1 October 2020.
Special COVID-19 tax reserve
The loss-compensation rules for Dutch corporate income tax purposes currently allow one year carry back (and six years carry forward). Taxpayers that would end up with a loss in 2020 as a result of the COVID-19 crisis, could carry back such loss to financial year 2019. (Provisional) formalization thereof (including the refund of the 2019 tax paid) would take place in 2021 or 2022 at the earliest. Please note that provisional loss compensation is capped at 80% of the estimated loss.
To accelerate loss-compensation and the resulting cash benefit, it is possible to include a COVID-19 crisis tax reserve in the 2019 corporate income tax return. The amount of this reserve is the expected loss in 2020 as a result of COVID-19, but may not exceed the taxable profit 2019 excluding such reserve. By requesting a revised provisional 2019 corporate income tax assessment including such tax reserve, taxpayers can, if applicable, obtain a refund for financial year 2019. Taxpayers estimating an overall positive taxable result in 2020 are not allowed to benefit from this measure.
Postponement implementation date of the legislative proposal 'excessive current account debts of substantial shareholders'
The Dutch government had earlier proposed that as of 2022 a ‘substantial shareholder’ in a company (generally an interest of at least 5%) would be taxed on a deemed dividend if and to the extent the debts of the shareholder to the company (excluding a loan to finance the primary residence of such shareholder) exceed EUR 500,000. (Deemed) dividends received by a substantial shareholder are taxed in Box II.
In view of the COVID-19 crisis, the Dutch government has decided to postpone the implementation date to 1 January 2023. Consequently, the first reference date for the determination of a deemed profit distribution is postponed from 31 December 2022 to 31 December 2023. Substantial shareholders can, if necessary, anticipate on this expected legislative proposal up to and including 30 December 2023.
Reduction customary wage income for substantial shareholders
Shareholders that hold a substantial interest (generally an interest of at least 5%) in a Dutch company and work for this company are obliged to take into account a customary wage. Following a specific calculation method and under certain conditions, the amount of the customary wage may be reduced due to the COVID-19 crisis.
Increased 2020 budget for tax-free employment costs
As part of the employment costs scheme for Dutch wage tax purposes, an employer is entitled to a tax-free employment costs budget. To mitigate the potential impact by COVID-19, the tax-free employment budget will be increased for financial year 2020.
Deferral of taxes for suppliers of electricity and gas
Suppliers of electricity and gas are offered partial deferral of payment of energy tax, renewable energy surcharge and value added tax for the months April, May and June. It is intended that the supplier will consequently not charge these amounts to the relevant customers in those months. The measure has been designed as such that in practice it will almost always concern large electricity or gas consumers.
Measures unemployment insurance contribution
Per 1 January 2020, the lower unemployment insurance contribution is due by the employer for employees with an employment agreement for an indefinite period if the employment agreement has been captured on paper and has been signed by employer and employee. With regard to employees already employed for an indefinite period per 31 December 2019, the lower unemployment insurance contribution is due, if the employment agreement of these employees is captured on paper before 1 April 2020. The government extended this deadline to 1 July 2020.
Additionally, the government will introduce a relief for cases in which employees with an employment agreement for an indefinite period will make more than 30% overtime due to the COVD-19. Without this relief, the higher unemployment insurance contribution would be due by employees with retroactive effect. The government now approves for the lower contribution to apply during 2020.
New regulation compensation wage costs
On 2 April 2020 the Temporary aid scheme to maintain employment (“Tijdelijke Noodmaatregel Overbrugging voor Werkbehoud, NOW”) entered into force. The NOW has replaced the existing reduction of working hours scheme. The purpose of the NOW is to prevent unemployment. Under the NOW, briefly stated, employers continue to pay the employees' salary at 100%, while receiving a substantial compensation (“aid”) towards the wage costs of up to 90% of the wage bill (up to a certain maximum) from the Employee Insurance Agency (“UWV”). Requests for aid may be submitted as from 6 April up to and including 31 May 2020. A number of obligations are imposed on the employer to whom the aid is granted. In order to qualify for the NOW, the employer must demonstrate that it expects at least 20% loss of turnover during a three-month consecutive period. If the company forms part of a group in the meaning of the NOW, the main rules is that the loss of turnover of the entire group is taken into account. Nevertheless, if a group of companies as a whole suffers a loss of less than 20% of turnover, but an individual operating company that forms part of such group suffers a loss of turnover of 20% or more, this operating company is – under very strict conditions – as of 5 May 2020 also allowed to apply for aid. The NOW will most likely be extended for another three months as from 1 June 2020. It is however expected that other conditions will apply.
On 17 March 2020, the Luxembourg tax authorities (LTA) published a newsletter with tax measures for businesses in the context of the COVID-19 crisis.
The measures are twofold and relate to (i) tax filing obligations and (ii) tax payment obligations.
The filing deadline for 2019 tax returns is delayed to 30 June 2020 for both corporate taxpayers and individual taxpayers.
Corporate taxpayers may ask for (i) a waiver of the 2020 tax advances for corporate income tax (CIT) and municipal business tax (MBT) due for the first two quarters of 2020 and (ii) a deferral of other payments on account of CIT, MBT and net wealth tax (NWT).
To apply for the waiver of these 2020 tax advances, the taxpayer should file a form which is available online. The tax advances would then not become due and the payment of taxes would depend on the tax amount included in the tax assessment 2020. The ‘standard’ possibility to reduce advances by means of a reasoned request remains available.
For the deferral of other tax liabilities, a request needs to be filed by the taxpayer using a form that is available online. Under this procedure, an extension of four months without late interest payment accrual (normally at a rate of 0.6% per month) would apply. The extension only applies to the extent the tax amount is paid in full at the latest upon the expiry of the four months period starting from the original due date of the taxes. The extension applies to CIT, MBT and NWT that were not due prior to 29 February 2020. Wage tax is explicitly excluded, as are withholding taxes (such as for dividends and management fees).
Luxembourg is officially in a state of emergency (currently, for a period of three months). This allows the government to bypass the ordinary legislative process and to adopt measures more swiftly. More specific measures related to taxation as a result of the COVID-19 crisis may accordingly be announced, including on VAT.
Since 13 March 2020, the federal council has taken various measures aimed at slowing down the rapid spread of the coronavirus (COVID-19) including a partial lockdown. The summary below, provides an overview of measures immediately available to Swiss taxpayers to reduce pressure related to tax and other public levies.
Filing obligations: deadline extensions
Deadlines for pending tax return filings can be extended. Although deadlines for income tax returns vary depending on the canton, most cantons allow for extensions of the filing deadlines well into the second half of 2020. Many cantons have urged tax payers to use available online tools on the website of the cantonal tax administration to extend filing deadlines.
Several cantons have enacted automatic extensions for tax return filings, mainly with respect to individuals. Automatic extension notably apply in Aargau (31 May 2020), Basel-Stadt (31 May 2020), Solothurn (31 July 2020) and Zurich (31 May 2020). Taxpayers should also check availability to extend deadlines beyond that date. For corporations, the filing deadlines for tax returns can also be extended (e.g., Zurich with a regular deadline of 30 September 2020, but extensions are possible).
Revised tax invoices, deferral and abatements of tax payments
To the extent that the taxpayers expect lower income or profits for the 2020 tax period, revised tax invoices can be requested. However, 2019 taxes may partially already be due or become due: federal income taxes for the 2019 calendar year become due on 31 March 2020 whereas the due date of cantonal income taxes varies significantly. Most cantons levy a compensatory/late interest for amounts owed and paid after the due date. Therefore, tax payer may seek to pay taxes in instalments or request a deferral of payment to safeguard cash:
Revised preliminary invoices: taxpayers may request revised preliminary tax invoices. Invoices can also be set at CHF 0 (nil) to avoid any cash expenses. In most cantons, this will not hinder interest charges (e.g., compensatory interest in Zurich for 2019 taxes is 0.50%). Taxpayers may, however, always request a deferral of tax payments and/or a relief from taxes due to extraordinary circumstances.
Deferral of federal income tax: deferrals can also cover interest and have to be filed in writing with the cantonal tax authority or via online tools to the extent available on the website of the cantonal tax administration. A deferral can also extend to preliminary tax invoices. Tax payers may also request a payment in instalments (see below latest emergency measures).
Deferral of cantonal income taxes: in most cantons deferrals do not cover interest charges. However, in most cantons interest rates are low (e.g., 0.00% in Zug, 0.50% in Zurich for compensatory interest) or have already been lowered to 0.00% (e.g., in Solothurn). Taxpayers may even consider requesting a partial abatement. Requests for tax deferrals have to be submitted to the competent tax authority (e.g., the communal tax administration). Most cantons allow for online filing of the request. Tax payers may also request a payment in instalments.
Taxpayers may also request a full or partial abatement of income taxes. It is expected that abatements are still subject to strict requirements as a lot of cases can be handled through deferrals. Given the special circumstances, tax authorities have been urged to review requests for deferrals and abatements favourably. Some cantons already announced to treat the impact of COVID-19 as an extraordinary hardship for purposes of tax-related measures.
Similar possibilities apply for Swiss VAT where taxpayers may request a deferral of VAT.
No interest charges for most federal taxes and levies
Separately, on 20 March 2020 the federal council announced to lower interest charges for most federal taxes and levies.
- Direct federal taxes: for direct federal taxes (individual income and wealth as well as corporate income and capital taxes) the interest rate has been lowered to 0.00% from 1 March 2020 to 31 December 2020. As 2019 taxes become due on 31 March 2020, taxpayers will therefore not be required to pay interest even if they would not request a deferral and leave taxes unpaid.
- VAT, customs and special consumption taxes: For VAT, customs, excise duties and special consumption taxes (tobacco, alcohol, beer, heavy vehicle, automobile and petroleum taxes) the interest rate has been lowered to 0.00% from 20 March 2020 to 31 December 2020.
- Social security (first pillar): Finally, employers may also request a deferral of social security levies (old-age and survivors’ insurance, i.e., the first-pillar) without interest being levied.
Note that these measures notably do not apply to Swiss withholding taxes (Verrechnungssteuer) and stamp taxes (Stempelabgaben) for which the current interest is 5% p.a.
No debt enforcements
The federal government has suspended the possibility to start debt enforcements in Switzerland for the period between 19 March 2020 to 4 April 2020 pursuant to article 62 of the federal act on debt enforcement and bankruptcy. The suspension will tie in to the general debt enforcement holiday until 19 April 2020 pursuant to the Swiss debt enforcement and collection act.
Separately, the government also enacted a general stay for civil and administrative proceedings until 19 April 2020. However, please note that the regular stay does not apply to federal income taxes as the relevant act does not contain a stay of deadlines. Therefore, measures taken by the federal council will not hinder legal deadlines with respect to these taxes.
Filling of Swiss VAT returns
Extension of filing and payment deadline
In Switzerland, the current filing period corresponds to the calendar year. In principle, the Swiss VAT returns are subject to a quarterly filing period and the VAT form must be submitted unsolicited within 60 days of the end of the corresponding reporting period: 1st quarter until 30 May / 2nd quarter until 30 August / 3rd quarter until 30 November / 4th quarter until 28 February.
In order to strengthen its position, the taxable business may review the following options:
- Extension of VAT return filing deadline: The deadline for submission of the VAT return can be submitted online (no formal written request) and is in practice usually granted until the due date of the following reporting period. This in particular allows for some relief with respect to workload, taking into account the set-up or adjustment of the IT-systems for home office working spaces and potentially limited working capacities. However, the extension of filing deadline does in itself not affect the payment deadline.
- Extension of payment deadline and of instalment payments: inn case that the payment of VAT ( plus interest) causes the taxable business significant hardship, the Swiss Federal Tax Administration (SFTA) may agree upon request of the taxable business to allow for an extension of the payment period or for the agreement of instalment payments.
In principle, despite the extension of payment deadline, the VAT payable becomes due within 60 days after the end of the respective filing period and is thus usually subject to interest for late payment of 4% as of the date the filing obligation would have been due. In light of the current extraordinary circumstances and as a temporary measure valid as of 21 March 2020 until 31 December 2020, the SFTA and the Swiss Federal Customs Authority do not levy any interest for late payments for VAT, customs, special tax on consumption and excise duties, or for incentive taxes. Similar measures apply to direct federal taxes. The agreements on deadline extension or payment instalment are usually subject to the provision of reasonable security. It may be expected that the SFTA would adjust that requirement to the individual circumstances of the business concerned to avoid considerable hardship under the particular circumstances.
Review of filing period
In respect of the VAT filing period, it might be an option to review the suitability of the filing period for the taxable business:
- Monthly reporting: If the business is on a regular basis in an input VAT credit position, the business may request filing and submission on a monthly basis. It is expected that the filing period chosen has to be complied with for at least one tax period (12 months). While the application for this filing period usually requests rather high input VAT credit positions on a regular basis, the SFTA might lower its requirements under the particular circumstances.
- Extended reporting period: Furthermore, the law provides the SFTA with the option to allow taxable businesses on application, in justifiable cases, to apply other reporting periods, subject to the conditions outlined by the SFTA. The SFTA has not published any further specification as to how such extended reporting period may be possible. In case of a rather low input VAT credit position and a rather high VAT amount payable by the business, it might be an option to approach the SFTA and discuss the adjustment of filing period within one tax period (12 months) to, for example, six months.
Payment of VAT refunds
As pointed out above, the payment of VAT debts has to be made within 60 days after the filing period concerned. The same applies in case of a credit balance of the business, i.e. the SFTA is obliged to pay out the VAT credits within 60 days after receipt of the VAT return, otherwise refund interest of 4% will be due in favour of the business. While the SFTA does currently, as one immediate measure, not levy any interest on late payments after the expiration of the 60 days, it is possible that the SFTA will try to repay the VAT refund at their earliest convenience under consideration of the administrative efforts and resign from their right to wait for 60 days for the pay-out.
Request for tax abatement
The SFTA may on request of the business consider a full or partial abatement of bindingly assessed VAT. However, the cases for which such request can be filed based on legal provisions are limited to errors caused by excusable reasons, errors due to not observing formal regulations, and for VAT assessments of the SFTA which are claimed to be too high. The law does not provide for a tax abatement based on other reasons, i.e. based on the best judgement of the SFTA. While the tax abatement will remain limited to those cases and to the rather strict requirements applicable today, it is possible that due to the extraordinary circumstances, the SFTA may review the abatement requests of those businesses falling within the scope of the legally defined cases with a more favourable approach.