1. THE NETHERLANDS: RELIEF UNDER THE NOW-Fund
1.1.1 On March 17th, 2020 the Dutch government announced crisis measures to mitigate the effects of covid-19 on businesses and the loss of jobs. One of these measures is detailed in the so-called “Noodfonds Overbrugging Werkgelegenheid” (the “NOW-fund”). The NOW-Fund is of a temporary nature (three months) and will have immediate effect. Under certain (additional) conditions the NOW-Fund can be extended for another three months. The exact conditions for the extension will be announced at a later stage.
1.1.2 The NOW-Fund is a crisis fund. The goal of the NOW-Fund is to compensate companies for their wage costs for a period of three months due to an acute loss in revenue of at least 20% as a result of extraordinary circumstances that are not part of the normal entrepreneurial risk. The government has chosen for a lean and generic regulation that applies to all sorts of businesses, irrespective of the size or industry. The only requirement is that the company has a payroll tax number (loonheffingen nummer) and has one or more employees on the payroll in the Netherlands. It is expected that tens of thousands of companies will apply for the NOW-Fund.
1.2 RWT Facility
1.2.1 The NOW-Fund replaces the reduced working time facility (the “RWT Facility”) that applied until March 17th, 2020.
1.2.2 Pending applications for the RWT Facility are transferred to the NOW-Fund and considered to be an application under the NOW-Fund. UWV will request the companies with a pending RWT Facility application to submit additional information within a period of 4 weeks in order for the applications to be processed under the NOW-Fund.
1.2.3 If the RWT Facility permit has already been issued, this remains in force for the duration of the permit. It is no longer possible to extend the permit. The company can apply for the NOW-Fund after the duration of the RWT Facility permit. To prevent double relief payments under both the RWT Facility and the NOW-Fund the payments of the unemployment benefits paid out under the RWT Facility are deducted from the wage bill over the period March 1st, 2020 up to and including May 31st, 2020.
1.3 General Conditions
1.3.1 On March 31st, 2020 the NOW-Fund was codified in legislation and made public. Companies applying for relief under the NOW-Fund must meet/agree to the following conditions:
1.4 Application Process
1.4.1 The application process for the NOW-Fund is made electronically via an online form, made available on the government website of UWV at this link.
1.4.2 Companies can start applying for the NOW-Fund relief as from April 6th, 2020. The processing time is 13 weeks. Only one application per payroll tax number (loonheffingennummer) is possible.
1.4.3 In order to assess eligibility and prepare for the NOW-Fund application, please find below the information that will be required by UWV:
1.5 Requirements for Eligibility for relief under the NOW-Fund
1.5.1 The regulations list a number of requirements that must be met in order to be eligible for relief under the NOW-Fund.
1.5.2 The following obligations are imposed on the employer to whom a subsidy/relief is granted:
a. the employer is obliged to keep the wage bill the same as much as possible throughout the relief period;
b. after March 18th, 2020, and throughout the requested relief period the employer does not request permission to terminate the employment contract through UWV for reason of business economic reasons;
c. the employer is obliged to use the subsidy/relief exclusively for the payment of wage costs;
d. the employer is obliged to inform the works council or staff representation, as referred to in the Works Councils Act, or in the absence thereof, employees about the subsidy/relief;
e. the employer keeps records that are verifiable in such a way that all information relevant to the determination of the relief can be verified and, if requested, grants inspection of this administration until five years after the date of determination of the relief grant;
f. the employer submits the payroll tax return under the Wages and Salaries Tax Act 1964 at the prescribed times;
g. the employer will notify the minister immediately and in writing if other circumstances arise that may be relevant for a decision to change, withdraw or determine the subsidy;
h. after the period for which the subsidy has been granted, the employer submits a definitive statement of the decrease in revenue, accompanied by an auditor's statement from an accountant as referred to in Article 1 of the Accountancy Profession Act;
i. if the employer has been granted wage cost relief as referred to in Article 10d of the Participation Act, the employer will inform the Municipal Executive that granted the wage cost subsidies, about the granting of relief under the NOW Fund;
j. the employer will cooperate in research conducted by or on behalf of the Minister, aimed at providing the Minister with information, up to five years after the date of the determination of the subsidy, including by providing the necessary information, data and documents. that are important for taking a decision on whether to grant the subsidy, whether it is legally valid or whether the policy of the Minister has been developed.
1.6 Eligibility and Application for relief under the NOW-Fund
1.6.1 Determine the revenue decrease
Companies that expect that their revenue will decrease with at least 20% can apply for relief under the NOW-Fund. Revenue means revenue as per and in accordance with the company’s methodology for the annual accounts.
First one takes the company’s revenue over the entire calendar year 2019. Take 25% of the total annual revenue. That is the fixed revenue reference number.
Secondly the company needs to forecast its expected revenue over three consecutive calendar months in the period March 1st up to and including July 31st, 2020. The application can be submitted for one of the following periods:
The company therefore needs to determine the 3 month period in which it expects the revenue decrease to be at its worst.
The revenue decrease in the chosen three month period is compared to the fixed revenue reference amount of 25% of the annual revenue of the company over the calendar year 2019. If in comparison to the revenue (the fixed revenue reference number) in 2019, the loss in revenue over the chosen three months period shows a decrease of 20% or more, the company is eligible to apply for relief.
The company does not have to prove or demonstrate the reason for the revenue loss. This means that the company does not have to demonstrate a connection between the revenue loss and the coronavirus.
1.6.2 Group Level Turnover and Foreign Companies
The revenue loss is calculated at group top level. This means that the expected 20% revenue loss is calculated based on the total group wide revenues. Which companies fall under the ‘group of companies’ is defined by corporate laws (article 24b of Book 2 of The Netherlands Civil Code). A group is defined as an economical unity of legal entities and companies who are affiliated with one another.
The (consolidated) annual accounts will be the main reference for determining the revenue of the group of companies.
The employer must have employees on its payroll and pay Dutch social security premiums (“sv-loon”) on their behalf. Only subsidiaries with employees that fall under the scope of Dutch payroll and social security are eligible to apply for relief under the NOW-fund.
The application is done per entity with a Dutch payroll tax number. Note that some subsidiaries may have more than one payroll tax number.
1.7 Amount of relief under the NOW-fund
1.7.1 The NOW-Fund will compensate for a maximum amount of 90% of the wage bill (loonsom, that’s the entire wage sum on the employer’s payroll and for which payroll tax is paid in The Netherlands), depending on the percentage of decrease in the company’s revenue.
1.7.2 The table below sets out the employment benefits/remuneration that are/are not covered under the NOW-Fund.
§ Taxable income from current (active) employment (sv-loon) for a period of three months. Only the taxable wages of the employees on the Dutch payroll are covered.
§ This also applies to employees who are on the Dutch payroll, socially insured under the Dutch social security system but work abroad.
§ Wages of employees who are not insured for social securities and for whom no taxes/social security premiums are paid.
§ Wages of employees who are not on the company’s payroll but are hired via a payrolling or agency company.
§ Maximum compensation per employee is capped at EUR 9,538 gross (2 times the maximum monthly wage)
§ Wages above EUR 9,538 gross (including bonus, incentive etc.)
Fixed overall surcharge of 30% to cover a.o. the costs of:
§ Employers premiums
§ Vacation allowance
§ Pension premiums
§ Expense allowances
§ (Additional) premiums for unemployment and sickness benefits
1.7.3 Advance Payment
Based on the NOW-Fund application, UWV will pay the company an advance-payment of 80% of the expected amount of relief that will be granted based on the submitted data and information. The advance payment is based on the January 2020 wage bill. UWV aims to pay out the advance-payment within four weeks upon submission of the NOW Fund relief application.
The calculation of the advance payment is as follows:
% of the expected revenue loss * wage bill of January 2020 * 3 (months) * 1,3 (taxable income + 30 % surcharge) * 0.9 = [Relief Amount]
The advance payment is equal to 80% * [Relief Amount].
1.8 Final Decision on Awarded Relief Amount
1.8.1 Within 24 weeks after the awarded relief period, the company applies for the actual determination of the amount of relief. In order to determine the actual revenue loss, the company must submit an auditor’s report of the revenue loss. The actual revenue loss is therefore determined retro-actively.
1.8.2 The calculation of the actual relief is as follows.
% of the actual revenue loss * the wage bill in the three month period * 1,3 * 0.9
1.8.3 The Minister will determine the final subsidy within 52 weeks as from the receipt of the application. A correction will be applied if the wage bill appears to have decreased during the NOW-Fund period. Any excess amount pursuant to the UWV 80% advance payment will need to be paid back.
1.9 Sanctions in case of fraud or not observing the conditions
1.9.1 In case the employer submitted dismissal requests at UWV after March 17th, 2020 for reason of economic reasons and wants to apply for the NOW-Fund relief in full while keeping the in-scope employees employed, the employer should consider withdrawing the dismissal requests. If the employer fails to withdraw the dismissal requests (in time) this will result in a deduction and correction of the awarded relief under the NOW-Fund.
1.9.2 The correction is implemented as follows.
[total wage of the in-scope employees] * 1,5 * 3 * 1,3 * 0.9 = [total received relief for in-scope employees]
NOTE: it is not relevant whether UWV will grant permission to give notice of termination or not. This implies a 50% penalty of the wage bill of the in-scope employees over the three month period.
1.9.3 The advance payment provided may be wholly or partially reclaimed from the relief recipient if it was wrongly granted or for an excessive amount or if the obligations referred to paragraph 1.5 were not fulfilled.
1.9.4 The Minister may withdraw the relief grant or amend it to the disadvantage of the employer, if the employer is deemed not to have complied with the relief requirements during or after the period for which he has received the relief and therefore acted contrary to the purpose of the NOW-Fund.
1.9.5 The relief under the NOW-Fund is a “subsidy” and is subject to all relevant administrative laws in that respect. In case of abuse or fraud the government has all legal means to their disposal to impose all sanctions to the fullest extent permitted by law. We have not set-out these sanctions in this memorandum. The fact that the government has underlined that this is a crisis fund, intended for those companies that are in desperate need of the relief, and vocalizing an explicit moral appeal to only apply if the company truly needs the relief, renders us to expect that the government will not take abuse lightly.
1.9.6 Apart from all potential sanctions and obligations that could linger on for many years after the relief grant, we recommend that each company assesses whether the relief under the NOW-Fund actually weighs up against all the requirements and obligations that come with it. In certain cases a scenario of other forms of cost reductions or a restructuring with a calculated reduction in force may be a better option in the short and long term.
This blog is drafted on the basis of the available information on April 6th , 2020. We are monitoring the developments on a daily basis.
PLEASE NOTE: The laws are changing rapidly in the current pandemic/crisis. Therefore, the legal issues discussed here are subject to constant change. It is best to consult with your counsel concerning any specific legal advice you may have.
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