"There must have been a lot of bankruptcies recently because of corona". It sounds strange to many if you answer 'no' to this.
In fact, 2021 and the first half of 2022 saw a historically low number of bankruptcies. This was mainly due to the tax support measures that entrepreneurs could avail of. In practice, this meant that entrepreneurs temporarily did not have to pay payroll taxes and VAT. In addition - under circumstances - they could also appeal to specially designed schemes such as the emergency employment bridging measure (NOW).
However, tax arrears created by the measures will not be written off by the tax authorities. The entrepreneurs in question have been granted a 5-year period from October 2022 to clear these arrears. This implies that, in addition to the regular monthly remittances, the entrepreneur still has to catch up. In addition, there may be other repayment obligations under the additional corona schemes.
After a long period of mostly little to no turnover combined with mostly ongoing costs, this will financially (as yet) have a major impact on the company.
If, as an entrepreneur, you are facing such financial obligations, you can, under circumstances, submit a request for remission to the Tax Administration. A condition for a waiver request is - in any case - that the business is viable and can continue to meet its current obligations.
In practice, such a request means that, in consultation with the tax authorities, you come to an agreement whereby a fixed amount is paid against final settlement of the arrears. As an entrepreneur, you buy off your tax arrears through a 'partial payment'.
A (temporary) amendment to the Collection Guidelines 2008(link) makes it possible for the Tax Authorities to agree to an equal percentage (partial payment) as offered to regular trade creditors by the entrepreneur in the context of this remission. Prior to this change, the Guideline stipulated that this percentage had to be at least double the percentage offered to trade creditors.
This relaxation is valid until 1 October 2023.
Companies' financial problems will rarely be exclusively fiscal in nature. Moreover, under circumstances it may be difficult (or even unfeasible) to meet the conditions for tax remission.
In such cases, the reorganisation option under the Homologation Private Agreement Act (WHOA)[1] would offer a possible solution for as an entrepreneur. Under this relatively new law, companies have the option (mostly at their own discretion and interpretation) to offer a composition to all creditors, including, for example, the tax authorities and the UWV, but also to regular trade creditors. Such an agreement may, provided the conditions are met, even become a compulsory settlement if ratified (homologated) by the court.
Offering such a (forced) settlement has no fixed term, but can - in general - be completed within a relatively short period of time. If the agreement succeeds, it leads to reorganisation, so that the fundamentally healthy company can then continue without the heavy debt burden.
If you are a business owner considering a restructuring, it makes sense to take action right now given the temporary tax relaxation and the opportunities offered by the WHOA.
Our lawyers of Team Insolvency and Restructuring are knowledgeable and experienced in negotiating debt restructuring with creditors, including the tax authorities. They will be happy to inform and advise you about the concrete possibilities for your company.
[1] This law entered into force on 1 January 2021. Official Gazette 2020, 414.