Netherlands: Q&A NOW-5

Introduction

On 26 November 2021, the Dutch government announced the Fifth temporary aid scheme to maintain employment (NOW-5). The NOW-5 is a direct result of the (contact limiting) measures announced by the Dutch government on 26 November 2021. The NOW-5 was published in the Staatscourant on 10 December 2021. The NOW-5 provides for a two-month wage subsidy scheme from 1 November 2021 up to and including 31 December 2021. The NOW-5 can be applied for from 13 December 2021. Even if an employer did not make use of the earlier NOW schemes, an application for the NOW-5 can be made.

On 18 December 2021, the Dutch government announced a lockdown. Due to the short time between the announcement and the implementation of the lockdown, entrepreneurs had little possibility of adjusting their business operations in time. Therefore, on 21 December 2021, the Dutch government announced that it would extend the economic support package for the fourth quarter of this year in order to provide additional support and security to working people and entrepreneurs. This extension also has implications for the NOW-5.¹

This Q&A outlines the most important aspects of the NOW-5. This Q&A includes the extension as announced in the Parliamentary Letter of 21 December 2021. At the time of revising this Q&A, this extension had not yet been published in the Staatscourant.

1. What is the purpose of the NOW-5?

Article 3 NOW-5 sets out the purpose of the subsidy. The purpose of the NOW-5 is to help employers with the payment for wage costs if there is a sudden drop in turnover of at least 20% over the turnover period. The aim is, on the one hand, to prevent unemployment as much as possible and, on the other hand, to enable employers, together with their employees, to prepare for and adapt to the new economic situation. It is explicitly noted that no profits or bonuses may be distributed, or own shares may be purchased (for the year 2021, according to the explanatory notes to the scheme). Pursuant to Article 16 NOW-5, this obligation is limited to the board and the management of certain companies (see question 12).

We would like to point out that in practice we have noted that it may be the case that the payment of a bonus under the text of the bonus ban as laid down in the NOW should be possible, but that the bonus payment would, according to the accountant, be in conflict with the purpose of the regulation. This is also stated in the FAQ published on the NBA website.²

In addition, Article 19 NOW-5 states that the aid may be withdrawn or amended to the employer's detriment if at any time it appears that the employer has not acted or failed to act during or after the period for which he received aid in line with the purpose of the NOW-5.

2. In respect of which employees may aid be requested?

Employers may request aid to compensate the wage costs for those employees (i) that are employed by the employer and (ii) that are compulsory insured under employee insurance policies (insured wages for national insurance contributions purposes, hereinafter referred to as SV wages). Thus, aid may also be requested in respect of employees on flexible contracts, provided they continue to be employed by the employer during the period in which aid is granted and continue to receive wages from the employer. Temporary work agencies and payroll employers may also request aid.

Foreign employers who employ employees that are insured under the Dutch national insurance system may also submit a request under the NOW-5. The NOW-5 does not apply in respect of employees that are seconded to the Netherlands but are insured under foreign national insurance systems.

Because the overall wage bill is determined on the basis of all employees who receive SV wages, the NOW-5 also applies in respect of employees that are - what is called - 'fictitiously employed', but not in respect of uninsured Directors-Owners (DGA's) or voluntarily insured persons.

3. How is the amount of aid calculated (percentage)?

To qualify for the NOW-5, there must be a loss of turnover of at least 20%. As in the NOW-4, in the NOW-5 the maximum percentage of loss of turnover that can be reported is limited. Under the NOW-5 the employer can claim a maximum of 90% loss of turnover (this was initially 80%). This means that if an employer has 100% loss of turnover, the employer can report 90% loss of turnover.

The aid is related to the percentage of loss of turnover of the employer or, if applicable, the group (see question 5). The subsidy is 85% of the percentage of the loss of turnover.

If the loss of turnover is less, the aid will also be proportionally less. Below is an example, noting that 100% loss of turnover is thus capped at 90% loss of turnover:

The maximum reimbursement rate under the NOW is therefore 76,5%.

The answer to question 8 explains how the wage bill should be calculated.

4. How is the loss of turnover calculated?

Article 1(2) NOW-5 defines the term 'turnover'. For the definition of turnover, as in the previous NOW schemes, the definition of turnover in accounting law has been followed. The net turnover is taken as basis, i.e. the income from the supply of goods and services by the relevant legal entity's business after deducting discounts and the like from the tax charged on the turnover.

Paragraph 4 explicitly states that the subsidy the employer receives under the NOW schemes does not count as turnover. Also, the Reimbursement Fixed Costs (Tegemoetkoming Vaste Kosten, TVL) is excluded from the concept of turnover under NOW-5 (and under NOW-3 and 4). Paragraph 5 provides that unemployment benefits that the employer receives on behalf of employees under the Working Time Reduction Scheme (Werktijdsverkortingsregeling, WTV), which has been reopened since 1 October 2021 for non-corona related applications, count as turnover for the purposes of NOW-5.

Also for the NOW-5, the decrease in turnover is determined by comparing the turnover with the turnover of 2019. The decrease in turnover is determined by comparing one sixth of the turnover of 2019 (the reference turnover) with the turnover of a period of two months, namely November and December 2021 (the turnover period). Unlike the previous NOW schemes, under the NOW-5 an employer cannot choose over which months to have the loss of turnover calculated.

For some specific situations, the reference turnover is calculated differently. For recently started companies, see the following schedule:

A different reference turnover may also apply to companies that have acquired (part of) a company (see Article 6(6) NOW-5). See the following schedule:

5. My company forms part of a group. How will the loss of turnover be calculated in that case (Article 6 lid 9 NOW-5)?

If the legal entity or company is part of a group, the loss of turnover of the group - as the group was composed on 1 November 2021 - is assumed. A group is an economic unit in which legal entities and companies are organizationally interconnected. As with the previous NOW schemes, also for the purposes of the NOW-5 each parent-subsidiary-relationship is qualified as a group.

If a parent company has several subsidiaries, the turnover of the parent company and its various subsidiaries must therefore be jointly determined. This also applies if a private equity firm is the majority shareholder of one or more topholding companies in the portfolios in which it holds an interest. In those cases, there is a parent-subsidiary relationship and all such portfolios will jointly be treated as a group.

This also applies to a private equity firm that is the majority shareholder of one or more top holding companies of the portfolios in which it participates. In those cases, there is a parent-subsidiary relationship and all the portfolios concerned will be treated together as if they were a group.

For the calculation of the loss of turnover, the starting point is the consolidated net turnover of the group (adjusted for a change in projects in progress accounted for in the profit and loss account). From this, the consolidated net turnover of the foreign entities without SV wages in the Netherlands is deducted.

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Footnotes

1. The Dutch government has also announced that the NOW-6 can be applied for in January, February and March 2022. The precise conditions that will apply to the NOW-6 will be communicated by the Dutch government in January 2022.

2. See FAQ's bonussen, dividenduitkeringen en inkoop eigen aandelen (art 6a NOW 1.0 en/of a) (nba.nl).

3. The explanatory notes explicitly state that in all cases, as in the previous NOW tranches, the acquired entity's turnover achieved before acquisition may not be included in the determination of the reference turnover

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.