view of the world

How tax authorities around the world are responding to COVID-19

Laurence Field, Partner, Corporate Tax
20/03/2020
view of the world

Tax authorities around the world are announcing measures to minimise the effect of cashflow problems on taxpayers. While the position is fluid and the details are subject to change, here is a summary of the key proposals from countries around the world.

If you have operations overseas and are experiencing issues with your tax payments please speak to your usual Crowe contact.

Australia

Cashflow assistance for businesses

  • $6.7 billion to boost cash flow of businesses with annual turnover of less than $50 million that employ staff between 1 January 2020 and 30 June 2020. Benefits include:
    • receiving a credit of 50% of the tax withheld in their activity statement from 28 April with refunds to be paid within 14 days
    • the credit is capped at a total of $25,000, but a there is a guaranteed minimum refund of $2,000.
  • $1.3 billion to small business employers of apprentices and trainees. Benefits include:
    • wage subsidy of 50% of the apprentice’s or trainee’s wage for up to nine months from 1 January 2020 to 30 September 2020, for those employees in training as at 1 March 2020
    • subsidy is capped at $21,000 per employee and is only available to small employers who employ fewer than 20 full-time employees.

Their is also administrative relief for certain tax obligations including an opportunity for businesses to defer their tax payments for up to four months.

Austria

As at 19 March the Austrian tax authorities have indicated companies will receive the following help with payments:

  1. outstanding payments will not be actively pursued
  2. there is an automatic deferral for any payments not made on time
  3. informal instalment arrangements are acceptable
  4. recovery action for unpaid taxes will cease
  5. no insolvency procedures will be initiated by the tax authorities.

Government guarantees are available for loans made to businesses in certain key sectors.

Belgium

A number of measures have been implemented and the key ones include:

  1. Employers Social Security, VAT, payroll taxes and corporate taxes can be deferred.
  2.  It has been made easier to temporarily lay people off.
  3. Penalties for failure to deliver federal contracts will be waived.

All of the above require the taxpayer to provide evidence that the reasons for the payment difficulties are COVID-19 related.

Canada

View Crowe MacKay's update on COVID-19: Federal Aid Update.

France

The French Revenue authorities have announced:

  • Companies needing to make USSRAF contributions as part of their payroll reporting can be paid by instalments. It does, however, require making an application electronically according to strict deadlines.
  • Where parents are looking after their children as a result of school closures, it may be possible to use the sick pay measures to subsidise salary. Employers will need to be able to demonstrate that their employees cannot work remotely, the children must be under 16 and only one parent can benefit from the scheme.
  • If it is necessary to put employees on part time working due to business conditions there are mechanisms for their salaries to be supplemented if the underlying reason is due to COVID-19 related disruption.
Germany

In summary some of the key measures include:

  • Salaries of employees working part time to be supplemented.
  • The options for deferral of tax payments and reduction of advance payments will be improved. This will be particularly important for freelancers and small businesses, who will need to contact their tax offices to be eligible.
    • The deferred collection of taxes will be made easier. The tax authorities can defer taxes if collection would be a considerable hardship but they are instructed not to impose strict requirements in this regard. This supports the liquidity of taxpayers by postponing the date of tax payment.
    • Advance payments can be adjusted more easily. As soon as it is clear that taxpayers' income is likely to be lower in the current year, advance tax payments are reduced quickly and easily, which will improve business liquidity.
    • Enforcement measures (e.g. account seizures) or late payment surcharges will be waived until 31 December 2020 as long as the debtor of a tax payment due is directly affected by the effects of the coronavirus.
  • Companies are granted the possibility of tax deferrals worth billions. The Federal Ministry of Finance has initiated the necessary coordination with the federal states on this issue. In the case of taxes administered by the customs administration (e.g. energy tax and air transport tax), the General Customs Directorate has been instructed to accommodate taxpayers. The Federal Central Tax Office, which is responsible for insurance tax and value added taxes have been instructed to do the same.
  • Germany is looking to support both companies and employees with new and unlimited liquidity measures. Government guarantees for loans will be made available. The Federal Government has a budgeted Eur460 billion of loan guarantees and this programme can be expanded further.
Ireland

Companies are advised to engage at the earliest opportunity with the tax authorities if they expect to experience difficulties paying taxes.

For SMEs

  • They are encouraged to send in their tax returns on time even when experiencing cashflow difficulties.
  • Interest on late payments of VAT for January/February and PAYE (Employers) liabilities are suspended.
  • Tax Debt enforcement is suspended until further notice.
  • Current tax clearance status will remain in place for all business over the coming months.

For subcontractors

  • The Relevant Contract Tax (RCT) rate review scheduled to take place in March 2020 has been suspended. The review assesses the compliance position of a subcontractor to determine whether their RCT deduction rate should be 0%, 20% or 35%. The upcoming review has been suspended as a review may result in a subcontractor’s RCT deduction rate increasing due to changes in their compliance.
  • Revenue also wishes to remind subcontractors and agents that ‘self-reviews’ may be carried out on ROS to check if a lower RCT deduction rate should apply.

When importing goods

  • Critical pharmaceutical products and medicines will be given a Customs ‘green routing’ to facilitate uninterrupted importation and supply.

Businesses, other than SMEs, who are experiencing cash flow or trading difficulties have been advised to contact the Collector-General’s office or engage directly with their branch contacts.

The government will keep the situation under review.

Read the full update on Crowe Ireland’s website.

Italy

Italy has offered a range of tax reliefs for businesses.

These are aimed mainly at SMEs -  see below for a five point overview:

  1. Debt terms will be reviewed to reduce the opportunity for lenders to call the full debt in, by being able to rely on support from the public finances.
  2. Payments of certain debts and lease obligations are suspended until 30 September
  3. The government will guarantee 80% of debts lent under a formal scheme administered by a prominent Italian bank
  4. From March 2020, VAT payments are suspended for businesses in a number of badly affected sectors in March for example sports, entertainment, hospitality to be paid by instalments thereafter.
  5. Interest and penalties for failure to pay taxes on time are suspended.

 

Kenya

The Kenya government on 25 March 2020 has issued a range of measures to relieve businesses and its citizens during the SARS-CoV-2 (COVID-19) pandemic. 

The measures aim to protect jobs, provide certainty to employees and employers, businesses and general public. 

  • VAT rate has been reduced to 14% from the previous 16% effective 1 April 2020. 
  • For employees, Pay As You Earn tax has been exempt 100% for incomes up to KES 24,000 ($240) and the higher tax rate of 30% reduced to 25%. 
  • For resident corporate businesses the corporate tax rate has been reduced to 25% from the previous 30%. 
  • Micro, small businesses and Medium enterprises who are in the Turnover Tax bracket will have the Turnover Tax rate reduced from 3% to 1%. 
  • For senior citizens (elderly), Orphans and vulnerable, KES 10 billion has been set aside for cash transfers as a cushion from adverse COVID-19 effects. 
  • The Central Bank of Kenya has reduced the Central Bank Rate (CBR) by 1 point to 7.25% which targets banks to reduce lending rates. Further the bank cash ratio has been lowered by 1 point to 4.25% to avail additional liquidity and stimulate further lending by banks especially to small businesses. 
  • Temporary suspension from listing with Credit Reference Bureaus for businesses and persons whose loans fall in arrears effective 1 April 2020. 
  • Other measures to provide businesses with much needed cash include expediting VAT refunds by Kenya Revenue Authority (at least 10 billion in next 3 weeks) and payment of verified pending bills by government (at least 13 billion in next 3 weeks).
Malaysia

The government announced a Second Economic Stimulus Package 2020 (ESP2) themed Prihatin Rakyat.

Netherlands

The Dutch government has announced a number of measures to limit the financial and economic consequences of the coronavirus for businesses. For a summary of the measures that currently apply please take a look at the Crowe Peak website: Coronavirus: Dutch fiscal and financial measures for companies.

Philippines
The Bureau of Internal Revenue has extended the filing and payment deadline from 15 April 2020 to 15 May 2020 for individual taxpayers with respect to their 2019 annual income tax return.
New Zealand

The government has announced further measures to support the country during the COVID-19 crisis.

The highlights

  • The government is expediting urgent work on new income support measures for all workers above and beyond the wage subsidy scheme, to be appropriate for how the economy will operate under Alert Level 4.
  • The government, Reserve Bank and retail banks have agreed in principle to significant temporary support for mortgage holders and a business finance guarantee scheme for those impacted by COVID-19 as the country moves towards Alert Level 4. The details of this will be announced in the next few days.
  • The cabinet has agreed to freeze all rent increases and to look to extend no-cause terminations to protect people during this difficult time.

Further details are available on Beehvie.govt.nz.

Poland

Tax support

  • Deadlines for payment of corporate tax, personal Tax, VAT and social security payments postponed with no interest charge on late payment.
  • Possibility to deduct the loss for 2020 from the income derived in 2019.
  • Postponement of the entry into force of the VAT changes (now from 1 July).
  • Postponement of the deadline for personal tax returns.

Companies affected by the virus pandemic will also be able to count on:

  • increase of state guarantee for companies up to 80% of the loan value 
  • solutions supporting liquidity
  • non-refundable loans up to PLN 5,000 for small companies, if they do not dismiss employees within six months
  • refinancing of leasing contracts (for the transport sector).

Support for employees

  • Coverage of 40% of employees' salaries up to the average salary (for companies that meet the conditions set out in the package).
  • Payment of up to 80% of the minimum wage for self-employed persons.
  • Extension of care allowance for children up to eight years old in the case of prolonged closing of schools, kindergartens and nurseries.
Singapore

Singapore has introduced a stabilisation and support package.

Companies will receive a 25% corporate tax rebate for the year of assessment 2020. The rebate will be capped at $15,000.

  1. Companies that file their estimated chargeable income (ECI) from 19 February 2020 to 31 December 2020 and companies that have filed their ECI before 19 February 2020 and have ongoing instalment payments to be made in March 2020, will be automatically granted an additional two months of interest-free instalments if they are paying their corporate income tax via GIRO.
  2. The existing carry-back relief scheme will be enhanced for the year of assessment 2020. Under the enhanced scheme, unabsorbed capital allowances and trade losses for the year of assessment 2020, subject to conditions, may be carried back up to three immediate preceding years of assessment. Businesses will be allowed to carry back an estimated amount of qualifying deductions available for the year of assessment 2020 before the actual filing of their income tax returns. The amount of carry-back allowed will be capped at $100,000.
  3. Qualifying capital expenditure incurred on the acquisition of plant and machinery in the financial year 2020 (i.e. year of assessment 2021) will qualify for accelerated write-off over two years.
  4. Currently, under Section 14Q of the Income Tax Act, a tax deduction can be claimed over three consecutive years of assessment on qualifying expenditure incurred by a taxpayer on renovation and refurbishment (R&R) for the purposes of its trade, profession or business. This will be temporarily enhanced to allow qualifying R&R expenses incurred in the financial year 2020 (i.e. year of assessment 2021) to be claimed over one year of assessment.
  5. The Wage Credit Scheme (WCS), that was first introduced in Budget 2013, encourages employers to share productivity gains with workers by co-funding wage increases of at least $50 given by the employers to Singapore citizen employees who earned a gross monthly wage of up to $4,000. The WCS has been enhanced in two ways in this year’s Budget. Firstly, the wage ceiling for co-funding will be raised from $4,000 to $5,000 for the years 2019 and 2020. Secondly, the co-funding ratios will be increased from 15% to 20% for the year 2019 and from 10% to 15% for 2020.
  6. A new jobs support scheme will offset 8% of the gross monthly wages of every employee who is a Singapore citizen or permanent resident. The grant will be subject to a monthly wage cap of $3,600 per worker. This is extended to all employers with the exception of government organisations and representative offices. This is a one-off scheme for 2020 only.
  7. The enterprise financing scheme which is available to SMEs across all industries will be enhanced for one year to help SMEs with their working capital needs. The government will raise the maximum loan quantum from $300,000 to $600,000 and enhance the government’s risk share to up to 80% (from the current 50% to 70%) for SMEs borrowing from Participating Financial Institutions under the scheme.
South Africa

Relief measures that will be made available in South Africa.

  • National Disaster Benefit Fund: R30 Billion has been allocated to a special National Disaster Benefit Fund, which will pay Unemployment Insurance Fund benefits for up to three months to qualifying workers whose income has been impacted by the coronavirus pandemic. This fund will address the coronavirus related job losses, support job retention, illness payouts and reduced time claims.
  • Informal sector support: A safety net is being developed to support persons in the informal sector.
  • SASSA: The South African Social Security Agency (Sassa) grants for pensioners and people with disabilities to be paid early.
  • Temporary Employee Relief Scheme: A special dispensation for companies that are in distress, through this employees will receive wage payment through the Temporary Employee Relief Scheme, which will enable companies to pay employees directly during this period and avoid retrenchment.
  • Banking sector: The Department of Trade and Industry has passed new regulations in the banking sector. The exemptions will allow banks to work together which will help small businesses, consumers and firms in distress.
  • Tax subsidy: A new tax subsidy of up to R 500 per month for the next four months for employees earning below R 6 500 per month.
  • Employment tax incentive: SARS to accelerate employment tax incentive reimbursement from twice per year to monthly.
  • PAYE & Provisional corporate income tax: Tax compliant businesses with a turnover of less than R50 million will be allowed to delay 20% of their PAYE liabilities over the next four months and a portion of their provisional corporate income tax payments without penalties or interest over the next six months.
  • Compensation Fund: Employees who fall ill through exposure at their workplace will be paid through the Compensation Fund.
  • SMME SA: The Department of Small Business Development made R 500 million available to distressed SMEs. Registration is now open for small and medium-sized businesses that require help during the coronavirus crisis.
  • IDC: The Industrial Development Corporation, together with the Department of Trade, Industry and Competition has committed R 3 Billion to a range of funding products in support of business to address vulnerable firms and for companies critical to fight the virus and its economic impact.
  • Tourism Relief Funding: The Department of Tourism has made an additional R200 million available to assist SMEs in the tourism and hospitality sector who are under particular stress due to the new travel restrictions.Solidarity Response Fund: This was setup to help deal with the fallout of the coronavirus, and measures to slow its spread. Individuals and businesses can contribute to this fund. Johann Rupert and Nicky Oppenheimer have donated R 1 billion each into this newly established Solidarity Fund.
  • Possible temporary reductions: Possible temporary reductions of employer and employee contributions to the Unemployment Insurance Fund and possible temporary reduction of employer contributions to the Skill Development Fund.
Spain
  • Spanish authorities have approved tax relief for small and medium sized businesses (SMEs) and for the self-employed.
  • SME’s will be able to defer their tax obligations for six months without interest.
  • The taxes included in this measure are income, corporate and VAT.
Thailand

Thailand's Cabinet approved a stimulus package on 10 March 2020 to help cushion the impact of the COVID-19 outbreak on its economy. 

Some of the key tax measures include:

  • to help small and medium-sized enterprises (SMEs) retain employees; they will be allowed to claim a deduction for three times the salary payments made from April 2020 to July 2020
  • the corporate withholding tax rate on certain payments will be reduced from 3% to 1.5% from 1 April 2020 to September 2020 if the tax payment is made electronically.

SMEs that take part in debt restructuring programmes will be able to claim a 150% deduction of interest expenses.

UK

HMRC has a set up a helpline with up to 2,000 experienced call handers to support businesses and self-employed people who are concerned about not being able to pay their tax due to coronavirus (COVID-19).

HMRC will discuss your specific circumstances to explore:

  • agreeing an instalment arrangement
  • suspending debt collection proceedings
  • cancelling penalties and interest where you have administrative difficulties contacting or paying HMRC immediately.

It is recommended that businesses contact HMRC at the earliest opportunity. Our expectation is that HMRC will request that businesses should demonstrate they have considered all other sources of funding prior to agreeing to payment of tax by instalments.

Having basic metrics available such as a record of recent financial performance and staff attendance could prove valuable in demonstrating the difficulties are attributable to the virus.

On 20 March 2020 it was announced:

  • all VAT payments can be deferred until 30 June 2020, with balances to be cleared by the end of the year
  • July self-assessment payments for individuals to be deferred until 31 January 2021
  • wages of people not working but furloughed and kept on payroll rather than laid off to be covered by a grant.  80% of salary up to £2,500 per month (just above median income) employers can top up as necessary. Backdated to 1 March for three months and will be extended if necessary.
USA

On March 27, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The law provides significant relief and opportunities. Regulatory guidance on implementing the law and addressing questions that arise will be highly anticipated in the days ahead. The highlights of provisions affecting businesses and employers can be found on the Crowe US website.

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Laurence Field
Laurence Field
Partner, Corporate Tax
London