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Can an entrepreneur get a time extension for payment of a tax claim?

Time extension for payment of tax claims by entrepreneurs

The tax authorities do not easily grant a time extension for payment of an income tax claim for entrepreneurs. Time extension for payment for an entrepreneur actually means that the tax authorities take over the risk of the business. This means that the tax authorities will act as an improper lender which is not one of their tasks. It is also possible that the time extension will be anticompetitive towards other entrepreneurs who do pay their tax on time.

The position of the tax authorities therefore is that entrepreneurs must first explore other options to pay the tax debt for example by contacting other lenders like banks. Only if it turns out that other lenders do not offer a loan to the entrepreneur the tax authorities may grant a time extension for payment, but only if other conditions, mentioned below, are met too.

Important comments

  • Time extension will not be granted if the entrepreneur has structural financial problems. 
  • The business must be considered sufficiently viable by the tax authorities.
  • Time extension can't last more than a couple of months.
  • The lenght of the time extension depends on the heigth and nature of the outstanding tax claim and the payment capacity and capital position of the business.
  • Time extension starts at the final paydate of the tax claim.
  • The tax authorities will look at the payment and filing history of the entrepreneur.

Conditions

To qualifiy for a time extension the entrepreneur must at least meet all the following conditions:

  1. The available credit facility must be insufficient to pay the tax claim. If there is a partial credit facility then first this part must be used to pay the tax claim. To be able to judge this the tax authorities want to receive a copy of the credit agreement and proof of the current outstanding credit facility. 
  2. The entrepreneur must provide a guarantee for the claim for which a time extension is requested. This guarantee should be easily convertable. Think of a bankguarantee, mortgage or a security provided by somebody who is credit worthy. 
  3. The guarantee must be at least for the same amount as the tax claim for which a time extension is requested.
  4. The tax authorities will provide a questionnaire which must be completed entirely and returned to them together with all requested documents.
  5. While the request for a time extension is being handled by the tax authorites no new tax debts should arise.

Timeframe

The tax authorities require both the completed questionnaire and all requested documents and proof of guarantee within 14 days after the questionnaire is being sent to the entrepreneur. So there is not much time to make arrangements. If the deadline of 14 daysis not met the tax authorities will refuse the time extension, otherwise the request will be processed further and checked with the applicable policies.

Documents required by the tax authorities

Copies of the following documents have to be provided together with the request:

  • Year end accounts for the past two years
  • the interim balance and profit & loss scheme for the present year
  • summary of the current projects/clients
  • a liquidity prognose for the coming 12 months
  • a general prognose for the coming two years

Based on the answers which are given on the questionnaire more documents may have to be provided like bank statements, year end statement of a mortgage, finance contract etc. 
 
So a lot of information and documents have to be provided to get a time extension for payment of a tax claim. Be aware of this and don't expect that the tax authorities will grant a time extension easily. 
 
There is a special ruling in 2012-2013 for wage tax and VAT claims. 
 
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