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Regulation Around the World: Open Finance
In this issue of Regulation Around the World we look at how regulators are developing their proposals for Open Finance.
Netherlands | Update | March 2020
1.1 Since the outbreak of the virus known as COVID-19 in the Netherlands, the Dutch government has announced several measures to mitigate the risk to the Dutch economy. Some measures are focussed on relief for employers, such as the temporary allowance of labour costs. These measures have been discussed in our earlier blog. We also published a separate blog on the possibility of deferring rent payments and the legal consequences of doing so.
1.2 In this blog, we discuss recently announced measures to support companies in the Netherlands relating to: (i) damage compensation, (ii) expanding government guarantee schemes and offering bridge loans, (iii) taxation, (iv) corporate governance measures and (v) initiatives from parties other than the Dutch government.
2.1 Certain Dutch companies affected by the COVID-19 crisis can receive one-time compensation from the Dutch government in the amount of €4,000 per company, to mitigate the direct impact of the measures taken by the Dutch government to prevent the further spread of COVID-19.
2.2 The compensation will be available to companies that were forced to close at least the majority of their business due to COVID-19 measures, and to companies that have experienced financial stress due to the requirement for people to remain 1.5 meters apart. The government refers to restaurants, bars and beauty salons as examples of the type of businesses that may be eligible for compensation.
Who is eligible?
2.3 Private companies that expect a loss of turnover of at least €4,000 and fixed costs of at least €4,000 in the period between March 16 and June 15 are eligible for the one-time compensation if they meet all conditions. The company must also (i) be established and registered with the Dutch Chamber of Commerce, (ii) have a maximum of 250 employees, (iii) have its main activity registered under a certain ‘SBI-code’ on March 15, 2020, (iv) have its physical establishment in the Netherlands, (v) not have received more than €200,000 in government support during the current fiscal year and previous two fiscal years and (vi) if not operating in the hospitality sector, have at least one branch that is not the home address of the owner (save for a few exceptions).
2.4 Companies can apply for this compensation until Friday, June 26.
2.5 As discussed more extensively in our blog dated March 18, 2020, individuals or companies that employ staff and expect a turnover loss of at least 20 per cent due to the COVID-19 crisis can claim compensation from the Dutch government for up to 90 per cent of staff wages, for a period of up to three months.
3.1 The Dutch government announced the extension of several existing credit guarantee schemes. When a company eligible for a credit guarantee wants to obtain a loan, it can apply for a loan with one of the participating credit providers (listed, here in Dutch), which then in turn submits an application for the relevant guarantee with the Netherlands Enterprise Agency (RVO).
3.2 Pursuant to the SME credit guarantee scheme, credit providers can receive a guarantee from the Dutch Ministry of Economic Affairs and Climate Policy for part of a loan. The loan can be used as a bridge loan or to increase the overdraft limit on current accounts. As part of the COVID-19 measures, the guarantee that can be provided by the government is increased from 50 per cent to 75 per cent of the loan. This increase is available from March 16, 2020 until April 1, 2021.
Who is eligible?
3.3 Companies in the Netherlands that (i) employ less than 250 FTE employees, (ii) have annual revenue of up to €50 million and (iii) have been established for more than three years are eligible for a guarantee for part of a loan through this scheme.
3.4 The number of loans eligible for the business loan guarantee scheme (Garantie Ondernemingsfinanciering, GO) has also been increased as part of the Dutch government’s COVID-19 measures. The GO offers an opportunity for large companies to obtain a 50 per cent government guarantee on financings in the range of €1.5 million up to and including €150 million. In addition, the government has raised the maximum amount of money available under this scheme from €400 million to €1.5 billion.
Who is eligible?
3.5 In short, companies are eligible to receive a loan under this scheme if (i) they have a registered office in the Netherlands and substantial activities in the Netherlands, (ii) they are considered a ‘healthy’ company, (iii) they have reasonable profitability and continuity prospects, (iv) the financing qualifies as ‘fresh money’, (iv) in the last 12 months no excessive capital withdrawals have taken place, and (v) the request is only made for the company’s own activities.
The government will release more information about this scheme shortly.
Credit guarantee scheme for agriculture
3.6 Companies in the agricultural sector that have been affected by COVID-19 can apply for a bridge loan in a maximum amount of €1.2 million under the credit guarantee scheme for agriculture (BL-C).
Who is eligible?
3.7 To be eligible for a government guarantee under the BL-C, a company must (i) have an agricultural enterprise, (ii) have a turnover that is mainly from plant product or livestock (primary production), (iii) be located in the Netherlands and, (iv) have its business activities primarily in the Netherlands.
3.8 Start-ups, scale-ups and innovative SMEs can apply for a special bridge loan at a regional development office in their area, in amounts from €50,000 up to €2 million, by means of the Corona Bridge Loan (Corona-Overbruggingslening, COL). When an amount of €250,000 or more is made available to a company, the government expects the company’s shareholders or other investors to also provide finance to the company.
Who is eligible?
3.9 To be eligible for a bridge loan under the COL, a company must (i) fall within the definition of “start-up”, “scale-up” or “innovative SME” as laid down by the Dutch government, (ii) be generally financed by means of external own funds (rather than bank loans), and (iii) deploy a substantial amount of its business in the Netherlands.
4.1 Companies with cash flow difficulties can request a special deferral of payment for certain taxes, including income tax, corporate tax, payroll tax and turnover tax (VAT). The request must indicate that the outbreak of the COVID-19 pandemic has caused payment problems. The companies that request deferral will automatically have such payments deferred for three months. In addition, no fines will be levied for late payment.
4.2 Companies can request a deferral of payment for longer than three months in writing. If the tax debt is lower than €20,000, the tax authority requests evidence that (i) the current payment difficulties make further deferral of payment necessary, (ii) the payment difficulties are caused mainly by COVID-19 and (iii) the obligation to file a tax return was complied with in respect of the tax debt for which a deferral is requested. For tax debts of €20,000 or higher, the tax authority will also require a statement of an expert third party (for example an external consultant, or an external financer). [KTRA: This paragraph needs to be tweaked to cover tax debts of EUR 20,000 exactly, e.g. by amending it to “If the tax debt is EUR 20,000 or lower”, if this is correct.]
4.3 Where required, the statement of the expert third party must contain the following elements:
4.4 Directors can be held liable if they fail to notify the tax authority of the company’s inability to pay certain taxes on time. If a request for a special deferral of payment is made and the request relates to tax return periods ending after February 1, 2020, the request will also be regarded as a notification of the inability to pay, filed on time.
4.5 If, due to COVID-19, companies expect a lower taxable profit, it is possible to file a preliminary tax return with a lower taxable amount.
4.6 This filing can be made through the online tax portal and the government has indicated that these requests will be granted by the tax authorities.
4.7 In their Corporate Income Tax return, companies can normally set off the loss over a year against the profit of the previous year (carry back). A loss over 2020 can be set off against the profit over 2019, but only after the tax return for 2020 is filed and a final tax assessment for 2019 has been imposed.
4.8 To shorten the time in which the loss can be settled, the Dutch cabinet announced that companies can deduct their expected loss over 2020 in 2019. This can be done by forming a provision. This provision cannot exceed the fiscal profit of 2019 and cannot exceed the expected loss for 2020. More details about the conditions under which the provision can be formed will be provided at a later stage.
4.9 The taxation interest rate and the interest on overdue taxes are temporarily decreased as per March 23, 2020 from 4 per cent to 0.1 per cent, for all tax debts.
4.10 The tax authorities will not impose or remit any penalties for failure to pay tax debts or late payment of tax.
5.1 On April 16, 2020, the Dutch House of Representatives voted in favour of the legislative proposal that aims to implement several measures in respect of COVID-19 which will be in effect until September 1, 2020 (unless extended) (the Temporary Act). The main measures that will be implemented pursuant to the Temporary Act relevant to businesses (it being noted that these only apply to companies incorporated in the Netherlands) are as follows:
6.1 Several Dutch banks and credit providers have been implementing measures to enable their clients to maintain some financial headroom during the COVID-19 crisis. Examples include lenders temporarily not requiring repayments to be made and reductions of interest rates.
6.2 For example:
6.3 The Dutch government wants to avoid issues with supplier credit due to the COVID-19 pandemic and has made additional funds available to reinsure all portfolios of private supplier credit insurers (such as Atradius N.V., the Dutch ECA) by means of guarantees with a total value of €12 billion.
6.4 Also, Atradius N.V. wants to support Dutch exporters of capital goods and services, as well as contractors and engineers operating internationally. For this purpose, it introduced special measures for export credit insurance in cooperation with the Dutch government and Dutch entrepreneurs. The package is temporary, applying until the end of 2020, and aims to (i) broaden certain measures (such as creating the possibility of coverage of short term export credit; insuring indirect export transactions; increasing the list of countries and the maximum coverage thereof and providing export credit guarantees for existing loans) and (ii) speed up the approval process. Besides this, there is an additional possibility of obtaining working capital from the Dutch Trade & Investment Fund.
6.5 In the Netherlands, municipal tourist tax must be paid by companies who operate tourist accommodation for guests from outside the municipality, such as hotels and camp sites. The percentage of tourist tax to be paid differs for each municipality in the Netherlands. Each municipality can decide to suspend or reduce the payment of the provisional assessment of tourist tax.
Publication
In this issue of Regulation Around the World we look at how regulators are developing their proposals for Open Finance.
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