Repaying Deferred Tax Payments

Many entrepreneurs received special deferral for the payment of taxes, including income tax, corporate tax, and payroll taxes, during the COVID-19 crisis. Starting from October 1st 2022, these entrepreneurs were required to begin repaying their tax debts, with a maximum repayment period of five years.

The standard repayment period is five years. However, there are some exceptions:

• Healthy businesses facing temporary repayment or liquidity issues may, under strict conditions, have a repayment period of seven years. The following businesses are not eligible for an extended repayment period: businesses that are financially sound, businesses that have accumulated a high tax debt, but made little profit before the COVID-19 crisis, and businesses with an outstanding tax debt of less than €10,000.
• Businesses can request a one-time repayment pause of six months for the outstanding tax debt. There is no threshold amount for this request. However, note that the maximum repayment period remains the same and the debt must still be repaid within the original timeframe. Therefore, after the pause the monthly repayment amount will be higher.
• Regardless of the amount of tax debt, businesses can request to make quarterly repayments instead of monthly repayments.
• The recovery interest rate for businesses is only 2% from January 1, 2023. This rate will gradually increase to the pre-COVID-19 level. It will be 3% starting from July 1st 2023, and return to the original rate of 4% as of January 1st 2024.
• For fundamentally healthy businesses with problematic debt burdens, specific situations may allow for debt restructuring agreements. The tax authorities are temporarily more flexible in accepting voluntary debt restructuring agreements. From August 1st 2022 until September 30th 2023, the tax authorities will accept the same payout ratio percentage as unsecured creditors.

Arrears in repayment of COVID-related tax debts

The tax authorities have stated that if entrepreneurs do not meet the conditions of the payment deferral arrangement, the arrangement will be revoked. These entrepreneurs will receive a notification from the tax authorities, announcing this revocation, starting from June 13th 2023.

To avoid recovery measures and additional costs, entrepreneurs have 14 days after receiving the notification to pay the entire amount of their outstanding COVID-related tax debt at once. However, we do note that this only applies to situations with structural arrears in repayment of tax debts and not in case just a single installment of the COVID payment arrangement has not been repaid.

To prevent the revocation of the payment arrangement, we advise you to contact the tax authorities as soon as possible.

More from the HBK Update June 2023

• New (temporary) legislation regarding box 3
• Holding on to definitive assessments and objections with income in box 3
• Restructuring box 3 assets before October 1st (valuation date arbitrage)
• Excessively lending act
• Limitations/Abolition of Business Succession Facilities
• Tax authorities will start checking for pseudo self-employment from 2025
• Convert loss from substantial interest into tax credit
• No tax-free allowance for each day working from home
• Repaying Deferred Tax Payments
• MIA and Vamil
• Reimbursement of costs for assistance with filing income tax return for foreign employees
• Co-operating spouses: Co-operating remuneration or co-operating tax deduction?