Companies that deferred tax liabilities during the Corona period will have to repay in monthly instalments since October 2022. This also applies to overpayment of NOW grants. The standard term for this is 60 months. There are many companies struggling to meet this obligation. Perhaps under normal circumstances they would have succeeded, but in the current uncertain economic climate with high inflation, they are not succeeding. As an entrepreneur, what can you still do about this? We offer five tips:
1. Explore the possibility of raising additional funding. If the house bank is not willing or able, there are plenty of other options. Consider factoring the debtors, raising a loan from one of the many Fintech platforms or crowdfunding. Increasing funding (temporarily) gives room to continue doing business while paying deferred taxes.
2. Take a good look at the asset side of your company's balance sheet. It may be possible to sell the premises and rent them back which could free up a large amount of liquidity. Through smart purchasing, stock levels can be reduced and through tight, automated debtor management, average payment terms can be reduced. This also creates liquidity.
3. If you really cannot manage to pay the monthly instalments, it is possible to apply for a one-off 6-month postponement. The disadvantage is that the instalments increase after those 6 months, as the total debt simply has to be repaid by 1 October 2027 anyway.
4. Under conditions, it is possible to ask the Tax Administration for permission to repay the debt in 7 years (84 months). However, this is subject to strict conditions. For example, no tax debts from before 12 March 2020 must be outstanding and normal obligations from 1 April 2022 must always be paid on time. For debts higher than €50,000, a third-party expert must certify that the company is viable.
5. If none of this works then there is one last, rigorous, option and that is the WHOA scheme (Homologation Private Agreement Act). Since 1 January 2021, it has been possible to reach an agreement with all creditors to reduce the company's debts in case of serious payment problems. In principle, the company must be viable. The creditors will then have to write off part of their claim so that the company regains a healthy financial position. Under conditions, creditors who do not want to cooperate can also be forced by the court to agree to the private arrangement anyway. Obviously, an external expert should be consulted in this process.
