Do you have questions regarding your challenges during the coronacrisis? Please contact your...
The coronacrisis and payroll taxes
9 April 2020 – As the coronacrisis develops, we are receiving many questions about payroll taxes. We have therefore listed some frequently asked questions and corresponding answers for you on this page. This includes questions about homeworking, deferment of payment, or the (customary) salary of the director-major shareholder (DMS).
CAN A DMS LOWER THEIR SALARY TO RETAIN MORE LIQUIDITY IN THE BUSINESS?
On April 1, 2020, the Dutch Tax and Customs Administration announced that a private limited company (bv) can temporarily lower the customary salary if the coronacrisis has had major implications for its revenue and liquidity. For this measure, no approval by the Tax and Customs Administration is needed. A salary that has already been earned cannot be retracted, meaning salaries over the last couple of months cannot be lowered retroactively.
When salary is lowered, this adjusted salary will be used for payroll tax returns in the following months. By the end of 2020 (or whenever employment is terminated), the customary salary over 2020 will be determined. When a bv has not paid enough salary by then, the difference should still be included in the payroll tax return. It is allowed to set the salary lower than the customary salary if the continuity of the business is at risk. However, this can never be lower than the statutory minimum wage corresponding to the number of hours the DMS works for the business in question.
The fact that the Tax and Customs Administration currently does not have to approve of these changes, does therefore not mean that they will not apply corrections when they determine that the salary has been set too low in this period.
Special deferment of payment; how does it work?
The special deferment will only be granted after a tax assessment has been imposed. Payroll taxes are paid on declaration. In the case of a monthly payroll tax assessment, this declaration needs to be submitted and paid within one month after the end of the tax return period. When payroll taxes cannot be paid due to the impact of the coronacrisis, the Tax and Customs Administration will eventually impose an additional assessment. For this particular assessment, a deferment of payment can be requested. Note that this request does not need to be made at an earlier stage. The Tax and Customs Administration has promised that, when a fine is imposed on an additional assessment due to late payment, this fine will not need to be paid. A request for special deferment of payment can be made until at least June 19, 2020.
For all assessments including those on income tax, the Healthcare Insurance Act (Zorgverzekeringswet), corporate income tax, payroll tax or VAT, you will only need to submit one joint request for deferment of payment. Note that you do not have to wait until you have received all five assessments in order to do so; one assessment is sufficient to file your request. It is important you keep filing your declarations in a regular manner, no matter the situation.
What tax concessions are in place for working from home?
There are a number of options. Firstly, the employer can provide a tax-free compensation to cover communication-related costs such as an internet subscription or a mobile phone. In order to be able to pay this compensation to employees tax-free, you will have to meet some criteria, however.
It is also possible to reimburse or provide occupational health and safety provisions for the home work environment. An example of this is a good office chair. It is important to keep some of the terms in mind here, for example that the provisions have to be derived from the occupational health and safety regulations fitting your employment policy.
Can I provide employees working from home with an extra tax-free compensation?
Based on the current regulations, it is not possible to provide a tax-free compensation for other costs, such as costs made for coffee or energy bills. It is possible, however, to provide compensation and assign it as a final levy component in the context of the work-related costs scheme (werkkostenregeling, WKR). This compensation will then be still tax-free for the employee (when meeting the standard practice criterion) and the employer as well unless the annual tax-free margin is exceeded.
Can I keep paying a fixed tax-free travel allowance when my employees are working from home?
Yes, and under the current regulations, this is already possible. In the case of long-term absence (often due to illness), fixed allowance is continued in the month the absence arises, as well as the month after. After these two months, the allowance is discontinued (or assigned to the tax-free margin). It is currently not clear whether this arrangement will be extended due to the coronacrisis, and the arrangement currently only applies to a fixed travel allowance. When travel expenses are reimbursed through declaration instead, this compensation will be discontinued when an employee ceases to travel for work.
How to deal with a general fixed expense allowance when working from home?
In principle, the fixed expense allowance matches the guidelines on the fixed travel allowance. For this reimbursement, too, it is not yet clear if more flexible arrangements will be made.
How is outsourcing and chain liability dealt with when the agency (‘uitlener’) has requested deferment of payment?
- Does the sub-contractor still receive a declaration of good payment behavior?
Unfortunately, this is not yet clear. It seems most logical to us that the declaration will still be provided, but with a note that postponement of payment has been granted in connection with the coronavirus.
- As a recipient (‘inlener’), should I take additional measures?
If the agency is NEN-certified and you, as recipient, deposit 25% on the so-called g account of the recipient, then the deposit will be considered a safeguard deposit given the deposit on the g account meets all administrative conditions. As a recipient, you are then indemnified. This will not change due to the coronacrisis.
Can the g account be unblocked when the company has applied for a deferment of payment?
Normally, only an existing surplus on the g account can be unblocked. Due to the coronacrisis, however, any sum that has been reserved for payroll taxes or VAT can now temporarily also be unblocked. When requesting an unblocking of the g account, the surplus and the sum that is normally reserved for payroll taxes and VAT should be separated. Note that in order to unblock the sum reserved for payroll taxes and VAT, a deferment of payment must be requested first.
Do I have to report inability to pay (director’s liability) when I have requested a deferment of payment?
When requesting a special deferment of payment, a separate declaration of inability to pay is not necessary. The request for a deferment of payment is in this cause automatically regarded as a declaration of inability to pay. This declaration is reviewed by the Tax and Customs Administration, who will notify you about their decision separately. This applies to both past and future tax return periods.
Cross-border situations: does working from home affect social security?
Due to the coronacrisis, many employees must now work from home. Both work location and working hours therefore temporarily deviate from the usual working pattern. The Social Insurance Bank (SVB) has announced that these changes in working hours and work location do not affect the social security position of employees. Working from home therefore does not cause any changes in social security. This only applies to situations where the employee remains employed with the same employer during this period.
The SVB states on its website that employers do not need to take any special measures for social security. However, other countries may request employers to take certain actions. If your situation involves countries other than the Netherlands, we therefore advise you to contact us. We can contact our colleagues working in various EU-countries, and investigate whether you need to take any action to preserve the social security of your employee(s).
Cross-border situations: does working from home influence taxes?
The general view of the Organisation for Economic Cooperation and Development (OECD) is that when countermeasures against corona are in place, salaries from employment should continue to be taxed as it was prior to the coronacrisis. In order to keep employees on payroll despite the potential constraints on their ability to work, some countries may provide subsidies. In these cases, the OECD’s general view is that these payments should be taxed in the country where the work was previously carried out.
The OECD will also make arrangements with its member states for other cross-border situations, where employees are working from home, while they would normally work across the border. The OECD aims to mitigate the administrative costs of these types of situations as much as possible. For cross-border situations, the OECD’s approach is therefore to retain taxing rights as they were prior to the coronacrisis.
Agreements regulating the above have been concluded with Germany and Belgium. Consequently, employees who now work in the Netherlands but who otherwise would work in Germany and Belgium in this period, will still be taxed in Germany and Belgium. While submitting their income tax return for 2020, they may choose to have their home working days taxed in their home country. However, that choice will affect also the income tax return of their country of employment.
For more information please see: Covid-19 Global Tax & Law Tracker | Taxation of cross-border employees
Want to know more?
If you would like more information on this subject, please contact Marco Zimmerman by e-mail or by phone: +31 (0)88 277 20 65. He will be happy to help you.
Some questions cannot yet be answered with certainty. We are currently still awaiting statements from the government or adjustment of existing regulations. We will update this Q&A regularly as the situation becomes more clear.
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Your challenges during the coronacrisis
These are special times where we face major challenges. The impact of the coronavirus is significant and the situation is constantly changing. We will inform you about new developments and measures and are of course at your disposal to support you where necessary with your current challenges. Do you have questions? Please contact your trusted Mazars adviser or use the contact form.