Additional tax measures to support Dutch companies affected by the Corona virus
Due to the Corona virus, the Dutch Government has taken additional measures to reduce the burden on companies faced with financial difficulties as result of the virus outbreak.
COVID-19 Tax reserve
Under normal circumstances, tax losses may be carried forward for 6 years, and carried back for 1 year. A 2020 loss can therefore be carried back to 2019. However, to be able to use this carry-back facility, the corporate income tax return for the year 2020 has to be filed, and the final CIT assessment for 2019 has to have been issued by the Dutch Tax Authorities. It can therefore take a long time before the 2020 loss can be utilized, which might lead to liquidity problems for the company.
To support companies who suffered from the measures taken in the fight against the spread of COVID-19, the Dutch Tax Authorities introduced a special deduction facility (COVID-19 Tax reserve). The COVID-19 Tax reserve may be formed for the expected losses to be incurred in 2020 as a result of COVID-19. The reserve is maximized to the taxable profit for the year 2019, meaning that the reserve cannot lead to a tax loss in 2019. The COVID-19 Tax reserve needs to be released in full in 2020.
Through this special deduction facility, companies will be allowed to utilize the expected 2020 losses in 2019. It goes without saying that this facility will result in a liquidity benefit.
Reduced tax interest rates
If the final tax assessment of any given year exceeds the amounts paid in advance (through preliminary tax assessments), tax interest is due. Currently, the tax interest for corporate income tax amounts to 8% and the tax interest for all other taxes amounts to 4%. As part of the tax measures proposed, the Dutch Tax Authorities have decided to lower all tax interest rates to 0.1%. The lower interest rate is applicable for the period from June 1, 2020 until October 1, 2020.
The standard tax interest rate for late payment of all tax assessments amounts to 4%. This amount is calculated over the period from the due date until the date of payment. As part of the tax measures proposed, the Dutch Tax Authorities have decided to also lower this tax interest rate to 0.1%. The lower rate is applicable for the period from March 23, 2020 until October 1, 2020 and applies to all taxes.