Covid-19 is disrupting business across the world requiring tax authorities to implement rules and reliefs to support businesses through this period. We are pulling our global indirect tax resources together to create a single source of information, support and thought leadership.
What type of business is this information relevant for?
All companies operating in the Netherlands, specifically healthcare and leisure
VAT/GST reliefs – Temporary VAT/GST Covid-19 measures announced by Dutch tax authorities
- The easing of extension payment in respect to VAT and other Dutch taxes. After receiving a specific written request, the Dutch tax authorities will directly grant the extension of actual payment for VAT. Furthermore, it is not necessary to immediately provide the normally obliged ‘third-party statement’ as a supplement to the request.
- In order to temporarily support companies, any default penalties for not paying taxes or for the late payment of taxes do not have to be paid. Moreover, the Dutch tax authorities will reverse any default penalties if they were already imposed.
- Relief of collection interest and interest on underpaid tax. In principle, if an assessment is not paid in time, 4% collection interest (invorderingsrente) applies if the payment term is due. To stimulate that, companies can request extensions for tax payments, the collection interest will be reduced from 4% to 0.01% per 23 March, 2020 for all taxes.
- Entrepreneurs using a so called ‘G-Account’ can request the tax authorities to unblock this account. A G-Account is a blocked account for VAT payments in specific sectors normally, and only a surplus on the G-Account will be released. However, because of the Coronavirus crisis, companies can request a temporary release. The amount of the release is based on VAT assessment. For these assessments, a postponement for VAT payments must first be applied.
- The outsourcing of healthcare personnel will currently be VAT exempt irrespective of who the outsourcer is. The right to recover VAT of the outsourcer is not affected by applying the exemption under this special scheme. This also applies on the incurred VAT on costs for such personnel. The following conditions apply on this exemption:
- The hirer must be a healthcare institution or a healthcare organisation that applies the VAT exemption for medical care.
- The outsourcer may only charge the gross salary costs to the hirer, possibly increased by a maximum reimbursement of 5%.
- No profit may be intended or made with the outsourcing of staff.
- If medical devices are provided to healthcare institutions free of charge to healthcare organisations and general practitioners, no VAT is payable. The right to recover VAT of the party providing the medical devices is not affected by applying the exemption under this special scheme. The party providing the medical devices is also able to recover the incurred VAT on the purchase of such devices.
- If fitness clubs provide online fitness classes to its members, the lower VAT rate, as normally applied, is still applicable.
What ideas have you generated to support businesses?
Many entrepreneurs – and specifically those who are operating in the event and leisure industry – are questioning on how to deal with the VAT treatment of cancellations and cancellation fees. Depending on the contractual agreements and fees charged, it may be possible to obtain a full or decreased refund of the VAT initially charged. This strongly depends on the contracts and precise arrangements between the company and its clients.
Companies often have a bank overdraft but have now exhausted the capacity. Instruments are available to generate cash in the short term. The following instruments can be used for this:
- Sale and lease back schemes: sell the property on the balance sheet to the investor, this generates cash and the property can then be leased.
- Factoring: an entrepreneur transfers their invoicing and bad debt risk to a company specialising in this, the factoring company. In exchange for paying this company a fee, the entrepreneur immediately receives the funds they are owed.
- Taking out or increasing a mortgage for any immovable property owned by the company.
We also notice the company’s endless efforts to ensure payment on the outstanding invoices within the legal payment date. This to support the cash flow of the suppliers of the entrepreneur.
Entrepreneurs can also provide an advance payment on personal initiative or request. As far as VAT is concerned, it is important to consider that, in principle, VAT is also due immediately at that earlier point in time.
In case of discounts on products or leases a reduction of the taxable amount will have an immediate effect on the VAT due. Agreements of discount should be properly documented in the case of a deviation of a contractual agreement.
It is also possible to make a payment schedule with any customers with cash flow problems because of the Coronavirus. The possibility of a payment plan could however have implications for the amount of VAT due. When for example lease payments are delayed and this is converted in an (non-)interest bearing loan, the lease amounts due shall be deemed to have been paid for VAT purposes. If the loan cannot be repaid, any VAT on this debt cannot be recovered under the bad debt relief scheme.
Companies also issue vouchers to generate revenue, a lot of initiatives are already started. Vouchers ensure revenue, however, the delivery of the goods or services takes place at a later moment. The issue of a voucher could lead to various VAT consequences. Based on the type of voucher VAT can be due on the moment of issue (single purpose vouchers) or the moment of the provision of the goods or service (multi-purpose vouchers).
Call to action
Businesses should investigate the possible ways of ensuring their cashflow. Instruments to ensure the cashflow of a company could lead to various VAT consequences. To prevent any additional VAT issues because of the Coronavirus, we advise you to contact RSM before the transaction takes place.
To keep up to date on any VAT related coronavirus issues, please refer to the RSM Netherlands News page by clicking here.