With the suiting Dutch Tax Deferral you can avoid a pending Tax Liability
In 2008, the economic crisis got hold of the Netherlands. The first casualties were those already in a financial struggle. At the beginning of the crisis, both entrepreneurs and enterprises bit the dust. Because they were no longer able to pay their outstanding invoices, they subsequently put the financial continuity of their creditors in harm’s way. Consequently, the economic crisis struck once again, inflicting bankruptcy on initially healthy and vital enterprises. To make matters worse, Dutch banks were unable to ease the pain and offer suiting financial aid, since enforced recovery procedures in case of payment failure would only rub salt in the wound. Luckily, several entrepreneurs and enterprises battled their way out of the economic crisis. Although surviving darker days, many of them still deal financial problems, of which Dutch tax liability is a common sore point.
Dutch Tax liability
A Dutch tax liability arises when taxpayers are not able to pay their taxes in time. When facing such financial difficulties, it is always to your benefit to seek advice. A tax deferral or even a tax remission might guarantee the continuity of your enterprise.
How to avoid a Dutch tax liability?
A Dutch tax liability can often be prevented by applying for a suiting tax deferral. We can advise you on the deferral scheme that best suits your financial situation. The five possible Dutch tax deferral schemes are listed below.
- General Dutch Tax Deferral
- Special Dutch Tax Deferral
- Short Dutch Tax Deferral
- Dutch Tax Remission
- Dutch Tax Deferral for Ex-entrepreneurs
The general Dutch tax deferral gives entrepreneurs the chance to avoid a tax debt by granting them a payment period of twelve months from maturity. Yet, this opportunity also comes with several conditions and obligations. The measure and nature of the Dutch tax liability, as well as the enterprise’s position regarding liquidity and capital determine whether or not your enterprise qualifies for the tax deferral. The Dutch tax authorities base their assessment of these factors on how the enterprise dealt with tax returns and payments in the past. In return for the tax deferral granted, the tax authorities expect you to punctually comply with the obligations the deferral entails. Although it does not comprises these obligations, a slightly lax entrepreneur may jeopardise his tax deferral.
In times of crisis, you may also apply for a tax deferral granting payment period of more than twelve months. This is possible even when you cannot guarantee a full reimbursement of the outstanding tax liability. In 2013, the Dutch tax authorities lifted the restriction to crisis-related situations. Therefore, you may request the special tax deferral on the condition that an objective third party verifies your company’s payment problems. This testimony must confirm that the financial problems are temporary in nature and could be solved within a set period of time, thus securing the viability or your enterprise.
On the other hand, a tax deferral shorter than a year may be to your benefit. One of the advantages of such a sort tax deferral is that it does not entail a tax audit. It does impose strict conditions, though. First, the Dutch tax liability may not exceed the amount of €20.000, regardless of debts included in the scheme through an objection or appeal.
Second, you may not have other tax liabilities for which an enforced recovery procedure is issued. Outstanding offense penalties or the omission of returns prevent you from the tax deferral. You won’t be granted a deferral either when the tax liability concerns an already existing tax deferral.
Lastly, you do not qualify for the short tax deferral if personal or corporate income tax advances of the current fiscal year caused the tax liability which can be paid out over multiple payment periods.
As an entrepreneur, you may also opt for a remediation when your enterprise has entered a creditor’s agreement under which a partial reimbursement of the debts is set of against a waiver or remission. Such a remission is also granted by the Dutch Tax Authorities, since they act as one of the creditors.
The Dutch tax remission is subject to strict regulations. First of all, a remediation is limited to those enterprises that remain viable because of the constitution of the creditor’s agreement. The creditors involved can only collect a debt that is not made by an independent third party. In addition, the agreement must avoid discrimination against debt collectors in order to favour more privileged creditors. Such privileged creditors are entitled to a substantial part of the reimbursement, both in absolute as well as relative terms. Their part should amount to at least double of the percentage paid to the other creditors. Furthermore, the reimbursement privileged creditors receive, must be at least equal received by the execution. Finally, the fiscal obligations set out by the creditor’s agreement must be adhered to at all times.
Even as an ex-entrepreneur, you are entitled to request a tax deferral for a Dutch tax liability made by your former enterprise. Just like an entrepreneur, the deferral gives you the chance to repay the liability over a period of twelve months. Yet, this payment period may be prolonged under the right circumstances. In addition, the Dutch tax authorities may treat your request for deferral as a request for remediation instead. This is the case when the one-year payment period proves to be insufficient to repay your tax liability. The treatment of your request is thus based on your financial capabilities.
Please feel free to contact us for more information.