The government will once again be taking additional fiscal support measures to mitigate the negative impact of the coronavirus crisis for entrepreneurs in particular. The six measures in question were announced on Friday, 24 April.
Lower customary salary for directors/major shareholders
If you are a director/major shareholder, you are obliged to declare a ‘customary salary’ as the salary you receive from your company. In 2020 this customary salary would ordinarily have to be at least € 46,000. It can also be set at 75% of the salary for the most comparable position or at the level of the highest salary received by your company’s employees, if one of them earns more than € 46,000. It had previously been decided that the customary salary could be set at a lower level as a result of the coronavirus crisis. Now it has been announced that the customary salary may be reduced in proportion to the drop in your turnover. The measure will be structured in a similar way to a comparable measure used to determine customary salaries during the credit crisis around 2009. A condition at that time was that a dividend could not be paid out instead of a customary salary. According to calculations by the government, the measure should result in an average benefit of € 6,200 per director/major shareholder.
Relaxation of hour criterion
Entrepreneurs who are subject to income tax are entitled to take advantage of all kinds of facilities, such as the self-employed person’s allowance, to qualify for which you usually have to dedicate at least 1,225 hours a year to your business. To prevent entrepreneurs from losing access to these facilities if their business has come to a standstill or has very low activity as a result of the coronavirus crisis, for the period from 1 March to 31 May 2020 the tax authorities will assume that they have dedicated at least 24 hours a week to their business, even if these hours have not actually been worked. This relaxation of the facility will also apply to seasonal businesses, e.g. in the catering sector. On average, according to government estimates, this will result in a benefit of € 1,800.
Fixed budget under work-related expenses scheme increased
Under the work-related expenses scheme allowances and benefits in kind can be granted to employees free of tax. The work-related expenses scheme has a fixed budget of 1.7% of the wage bill up to € 400,000 and 1.2% on the excess amount. The employer only pays 80% tax via the final levy if the allowances and benefits in kind granted during a year exceed this fixed budget. For 2020 it has been decided that the fixed budget for the first € 400,000 of the wage bill will be increased to 3%. In these difficult times this will enable employers to offer their employees additional untaxed remuneration, such as a gift voucher or bonus, without the employer becoming liable for the 80% final levy. Thanks to this increase, an employer will be able to allocate up to an additional € 5,200 in allowances and benefits in kind to the fixed budget.
Offset losses via ‘coronavirus reserve’
Companies that pay corporation tax on their profits, such as private limited companies (BVs), are being allowed to include an expected loss in their 2019 tax return this year (and therefore earlier than would normally be the case) by forming a ‘coronavirus reserve’. This is subject to the condition that this coronavirus reserve does not exceed the profit for 2019. According to government estimates, this means that, on average, a company will receive € 25,000 in 2020 instead of in 2021 as a result of refunds on provisional tax returns for 2019.
Postponement of Act on taxation of excessive loans received by shareholders from their own company
The legislative proposal relating to the taxation of excessive loans received by shareholders from their own company, commonly known as the ‘DGA’ (director/major shareholder) tax, is being postponed by a year until 1 January 2023. Under this proposal a director/major shareholder will be required to pay tax on debts to his or her own company that exceed € 500,000, leaving debts used to finance his or her own home out of consideration. The postponement means that directors/major shareholders will have an extra year, until 31 December 2023, to pay off debts to their company of more than € 500,000 and in this way avoid paying tax on them.
Deduction of mortgage interest not at risk if repayments temporarily suspended
For mortgages taken out with effect from 2013 the deduction of mortgage interest is subject to a repayment obligation. As a result of the coronavirus crisis, banks are now offering their customers the option of suspending their interest payment obligation and repayment obligation for a maximum period of six months. To prevent the right to deduct mortgage interest being lost as a result, the repayment obligation is being relaxed. This means that the rules are being relaxed in relation to catch-up repayments. It will be possible to spread these over the remaining term of the mortgage or agree on a separate repayment schedule.