Navigating COVID-19 tax relief and incentives for companies
Article 5 minute read

Navigating COVID-19 tax relief and incentives for companies

30 March 2020

Here’s what coronavirus support measures look like, and what businesses need to be aware of as they seek government help.

Coronavirus has put the planet on hold. Alongside the human toll, it is causing untold disruption to business.

The impact of the crisis on companies and their employees is continually evolving, but top of mind is cash flow and liquidity, and companies are looking at ways to maintain their cash positions.

As the situation develops, more and more governments are announcing measures to support organisations during this unprecedented period.

So what do these support packages look like – and what do firms need to be aware of as they attempt to navigate these uncharted waters?

Sweeping measures

Most of the announcements are around three areas – cashflow, employment and tax.

Lockdowns and other steps taken to protect health have resulted in many companies having insufficient funds to support their operations, and governments have moved quickly in response. France, for example, has announced a €45 billion rescue package which includes corporate tax and social security charge deferments to help struggling businesses. Germany is offering loans of unlimited size to small and large companies; and the USA has announced a $500 billion business bailout fund as part of a $2 trillion economic stabilisation package.

Support for workers whose employment is affected by the crisis has been similarly bold – and essential, as the USA alone logged a record number of jobless claims in one week. The UK, New Zealand and the Netherlands are among many countries allocating funds or offering subsidies to help firms pay wages and keep staff on the books.

There have also been sweeping tax announcements, with payment deferrals, rate reductions and moves to lighten the tax administration burden.

Coronavirus tax cuts, deferrals and filing extensions

In Asia, Hong Kong has proposed a cut in payroll, income, property and business taxes. Indonesia has extended its deadline for annual tax returns. South Korea will offer a VAT break for small businesses while Singapore has announced a universal 25% corporate tax rebate.

Tax collection is postponed in countries across the Americas; to support 4.9 million companies, Brazil won’t collect Simples Nacional tax for the next three months. Monthly provisional payments of corporate income tax are suspended in Chile for the next quarter, likewise, VAT for all companies with under 350 thousand UF of annual sales. And income tax payments for SMEs are postponed until July 2020. Businesses in the USA now have more time to file and make their tax payments – and they won’t incur any interest or penalties.

Measures taken by governments in Europe vary; all companies in France can defer their March tax payments. Deadlines are extended and/or suspended for companies in some parts of Italy, and credits will be granted to companies suffering a 25% decrease in revenue. The UK is deferring VAT payments until the end of June.

Accessing support

It’s crucial for companies affected by coronavirus to understand what tax and other relief measures they qualify for. Here’s a checklist for companies looking to apply to one or more of the many schemes.

  • Keep up to date with announcements. This is key, as governments are only just starting to flesh out how their schemes will work.
  • Assess your eligibility. Many schemes are only available to businesses in directly affected industries or if certain conditions are met. In Australia for example, the payroll tax liability of businesses with payrolls up to $10 million will be reduced by 25% when they lodge their annual reconciliation, which is due on 28 July.
  • Understand the application process. Some government authorities require businesses to apply, while others are automatically distributing funds and granting extensions to those that meet certain criteria. In Belgium, upon request, companies can benefit from a tax payment deferral plan, waiver of late payment interest and non-payment penalties.
  • Understand the enforcement process. Schemes have been announced, but in many cases the relevant laws are yet to be passed or enforced. It’s important to obtain the text of law to understand when provisions will be in effect and get across eligibility and application requirements.
  • Understand the documentation required. Given the current circumstances and the fact that many companies have activated business continuity planning, information/documents may not be readily available. This makes it more challenging to apply for relief. For example, in Romania, in order to benefit from utility payment exemptions or the technical unemployment scheme, businesses need to obtain a state of emergency certificate. And this is dependent upon the availability of the authorities and own resources to file the application and do the follow up.

Where possible, it’s recommended to continue working to your usual tax filing and payment deadlines. If delays are allowed or no penalties/fines will be enforced, ensure you have an official letter from the tax authority confirming this. Companies that meet their usual tax payment deadline may even benefit from discounts.

Ensure you are documenting the direct impact of the COVID-19 crisis on different parts of your operations, so you can provide this as evidence where support schemes require it.

Tax and accounting experts on the ground that speak the local language and understand the business landscape can help companies get a grasp on what they need to do, and enable a fast response.

Keep up to date with the latest COVID-19 government announcements on our dedicated webpage here.

If you need help applying to any of these support schemes, get in touch with our local experts.

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Written by

Emine Constantin

Global Head of Accounting and Tax

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