Request for debt restructuring and Corona: the tax collector thinks along

Requests for restructuring of tax debt

Until further notice, the Tax Authorities will approach requests for restructuring of tax debts with a flexible attitude. This applies in particular to requests from entrepreneurs whose businesses are fundamentally sound and who have been affected by the Corona crisis. For these entrepreneurs, the generous corona deferral policy may prove to be of no avail. But other entrepreneurs are also eligible for the more flexible approach. The flexible approach applies to all tax debts.

What does the flexible approach entail?

An important condition for the restructuring of tax debts is the existence of a viable enterprise. Whether this is the case must be assessed by an external party deemed suitable. This party should be the bank, an auditor or a restructuring expert. The assessment will include a forecast of the capacity to meet the costs of running the business, (re-)financing the business and the company’s remuneration. In addition, the forecast must show that the costs incurred during the reorganisation can also be paid. In some cases, the recipient may investigate the viability on his own initiative.

Entrepreneur cannot pay the tax debt

In addition to the fact that a viable enterprise must be present, it must also be shown that the entrepreneur is not or not fully able to pay the tax debts. Not even with the help of the generous deferral scheme in connection with the corona crisis. It should be noted, however, that the tax debt for which the restructuring is requested may not have arisen as a result of serious culpable acts or omissions on the part of the entrepreneur.

What is a debt restructuring proposal?

There is a reorganisation proposal. This means that unsecured creditors must also agree to the restructuring of the debts to those creditors. Only when that condition is met and the offer to the recipient is substantial and at least double the percentage offered to the unsecured creditors, can one speak of reorganisation of the debts.

How can the reorganisation be requested?

A request for debt restructuring can be submitted to the tax authorities using a prescribed form. A request will only be processed if it is actually complete. If the request is not complete, the tax collector will give the applicant 90 days to complete or rectify it.

What does a request for remediation comprise?

A complete request for restructuring includes, in addition to the prescribed form, a positive external assessment of the viability, an agreement from all creditors, a motivated statement from the entrepreneur about the cause of the financial problems and a liquidity forecast for the next 24 months. If the entrepreneur is also included in the COVID-19 deferment scheme and the associated payment scheme, the forecast must show that this payment scheme will also lead to the full payment of the tax debts.

When will a request for restructuring be granted?

A complete request will be assessed by the recipient, whereby the recipient may also examine the viability of the enterprise. If all conditions are met, the recipient will grant the application. The tax collector will reject the request if there is evidence of bad faith on the part of the taxpayer. In addition, the tax collector will reject the request if during the application no new obligations have arisen, the required declarations have not been submitted, there are multiple taxpayers, the taxpayer has been granted a moratorium on payments or is in a state of bankruptcy, and/or the Dutch Natural Persons Debt Rescheduling Act (WSNP) applies to the taxpayer.

In addition to a request for restructuring for a company that is being continued, the tax collector can also process a request for restructuring if there is a desire to terminate the company.

Granting the request for reorganisation

If the request meets the conditions and the recipient agrees with the request, the recipient will grant the reorganisation by means of a decision. This decision includes the condition that the reorganisation amount must be paid in one lump sum. In addition, in specific cases, it is possible to request a payment scheme in which the agreed amount is paid in 12 equal monthly instalments.

When can the decision be revoked?

The decision to grant remission is a conditional decision and can be revoked if it appears that the entrepreneur provided incorrect information which he knew or should have known was incorrect, if the entrepreneur is declared bankrupt, is granted a suspension of payments or is admitted to the WSNP. In addition, the decision can also be withdrawn on the basis of other conduct on the part of the taxpayer. For example, not meeting the tax obligations and not complying with the payment scheme for the agreed amount.

The tax collector can, however, give the entrepreneur the opportunity to rectify the shortcomings within a certain period of time.

In the end, a nice arrangement has been made whereby the recipient has the motto: in case of doubt, grant. Although collecting in case of doubt is not always the most sensible thing to do, at times it may be really necessary to try and avoid bigger problems.

Need advice from a lawyer in Rotterdam?

Do you have any questions about the collection rules regarding the tax debt arising from the corona postponement? Then please contact our lawyers Rob Steenhoek and David Harreman.