Countries around the world have been implementing emergency tax relief measures to support their weakened economies in the outbreak of Coronavirus (Covid-19) disease.
Countries are considering tax relief measures because the health issue is creating a massive economic shock. Regular payment of taxes will impact the liquidity of businesses and households.
The governments around the world are considering fiscal relief as a way of minimizing the economic impact on health crisis.
As policymakers tackle this crisis, they should keep the following in mind…
- The relief measures should be broadly defined.
- The policies should be defined keeping in mind the long term benefits of the country.
- Policies that include refundable tax credits should be designed in a manner that it would bring forward the future credits or deductions.
- Policymakers should also use this opportunity to fix distortive tax policies that could impact recovery efforts.
The following are the countries (listed continent-wise) which have implemented or plan to implement tax relief for businesses and households affected by COVID-19:
Income Tax –
- The last date for filing Income Tax Returns for FY 18-19 extended to June 30 from March 31 due to the Covid outbreak.
- Subsequently, all compliances under the Income Tax Act, Wealth Tax Act, Benami Transaction Act, Vivaad se Vishwaas, have been extended to June 30, 2020.
- The last date for linking PAN with Aadhar extended to June 30, 2020.
- The last date for filing March-April-May GST returns extended to June 30, 2020.
- No interests, penalty or late fees to be charged for late filing of GST Returns for companies with Turnover of INR 5 Crore of less.
- Interests charged on delayed deposits of TDS reduced to 9% from 18%.
ROC Compliance –
- Mandatory requirement of holding board meetings relaxed by 60 days, this relaxation is for the next two quarters.
- Newly incorporated companies get an additional 6 more months to file the declaration.
- (MSMEs) The threshold for default under IBC raised to INR 1 Crore from INR 1 Lakh.
China has reduced its Value Added Tax (VAT) from 3 % to 1 % for the cash accounting scheme for small businesses until the end of May. It also cut VAT on medical, catering, accommodation, hairdressing, and laundry services as well as on masks and protective clothing.
The country has delayed income, consumption, and gift tax filing deadlines and payments by one month, until 16th April, 2020. Further measures will be considered depending on how the situation evolves. The government has also temporarily eliminated altogether the 10 % consumption tax. Authorities have prepared a ¥30 trillion supplementary budget to address the hit to economic growth from the health crisis.
Indonesia plans to waive income tax for individuals for six months as it seeks to boost purchasing power. A second stimulus package will allow firms to delay payments of corporate and income tax on the sale of imported goods. These measures will be effective from April 1st and last for six months. Also, to encourage tourism to certain destinations, a 10 percent hotel and restaurant local tax will be lifted for six months, with the central government compensating local governments for the expense.
The cabinet has approved cutting the income withholding tax from 3 % to 1.5 % for six months, from April to September. It also doubled the tax benefit for investment in long-term mutual funds to USD 12,570. Thai Cabinet also approves Phase One of Covid-19 stimulus package The package includes 180 Billion Baht (USD 5.7 Billion) of soft loans from Government Savings Bank and the Social Security Fund, Finance Minister Uttama Savanayana says in a briefing in Bangkok.
Malaysia is exempting accommodation services from services tax and providing sales tax exemptions and lifting import duties on equipment and machinery.
The nation will cut its VAT for small businesses, give tax boosts for consumers replacing their cars early, and provide a new tax deduction on personal credit card spending.
In Iran, employees can defer tax payments for the next three months and the 3 million poorest Iranians will receive an additional cash subsidy. There will be additional tax relief for small to medium-sized enterprises.
Israel has delayed VAT payments for 10 days, from the scheduled March 16 date to March 26.
Turkey will give a six-month deferral on some tax and insurance premium payments to certain sectors, including retail and transportation. The VAT on domestic air travel will be cut from 18 percent to 1 percent. Minimum payouts for pensioners will be increased and the government will make an early annual bonus payment to pensioners.
Canada’s federal government is deferring tax payments for individuals and businesses. Any income tax amounts owed on or after March 18 and before September 2020 can be deferred until after August 31, 2020. In addition, post-assessment sales tax or income tax audits for small and medium businesses will be suspended for the next four weeks. The finance ministry will also provide a temporary wage subsidy to eligible small businesses worth 10 % of remuneration over 3 months.
The United States of America has adopted a short-term expansion of paid sick leave. Tax payments have also been delayed until July 15 without interest or penalties. Total fiscal relief under negotiation could exceed $1 trillion.
The government has introduced a program that defers tax payments for businesses with annual sales of less than $12 million.
Mexico has delayed deadlines for lawsuits in tax courts until April 19.
In Italy, tax deadlines have been extended for residents and companies in the so-called “red areas” of Italy. Also, all tax payments due in the period between February 23 and April 30 were extended until May 31, and tax credits will be granted to companies that suffer a 25 % drop in revenues. In addition, businesses receive a 50 % tax credit for sanitation expenses, such as daily cleaning services, masks, and other precautions that help stop the spread of new coronavirus. Italy’s Economy Minister, Roberto Gualtieri, announced that the government will adopt measures costing EUR 3.6 Billion (USD 4 Billion) to help the economy. Banks have been given options to take some loss deductions and convert them to tax credits.
The government has approved a tax relief for small and medium businesses and self-employed persons. Those businesses will be able to defer their tax obligations for six months without interest. The taxes included in this measure are income tax, corporate , and VAT.
The government is allowing companies to suspend payments of some social charges and taxes and is activating state-subsidized short-time work schemes.
The U.K. government will waive business property taxes for retail, leisure, and tourism for 12 months to reduce the economic impact of the coronavirus. It also paused its plans to expand rules on the employment status of contractors in the private sector. These so-called “off-payroll” rules aim to ensure that contract workers pay about the same tax and social security contributions as regular private sector employees. The United Kingdom is also expanding the Universal Credit and working tax credit by £1,000 and delaying £30 billion in VAT payments. The U.K. government is maintaining its commitment to introduce a digital services tax by March end.
Germany will make it easier for companies to claim subsidies to support workers on reduced schedules to counter the effects of the pandemic. This is the same measure which was used to help prevent large-scale layoffs during the 2008 financial crisis.
Tax relief measures include broad deferral options and tax base reduction for trade taxes. Tax deferrals will be granted without interest, but taxpayers must apply before December 31, 2020. Late payment penalties are waived through the end of 2020. Advance payments for income tax and corporate tax are delayed until June 10. Trade tax advance payments are delayed until May 15.
The government has also discussed implementing a reform to the solidarity tax (a 5.5 percent surcharge on high-income earners) in 2020 rather than in 2021 as previously planned.
Germany is also providing up to €50 billion in support for self-employed and small and medium-sized businesses, and up to €500 billion in liquidity measures for affected businesses.
Denmark announced three tax measures to boost business liquidity. Large companies will have 30 additional days to pay VAT, while all companies will be granted four additional months to pay their labor contributions. The government is also lifting the ceiling on businesses’ tax accounts so that corporations won’t have to pay negative interest rates when placing cash in the bank. That limit is rising from the current level of DKK 200,000 to DKK 10 Million until the end of November 2020.
Workers who are sent home will receive 90 % wage support for three months. The government is also covering sick leave costs from the first day of leave.
Greece will suspend VAT payments due at the end of March for four months and companies’ social security contributions will be suspended until June 30. VAT reduction to 6 % from 24 % for products related to preventing spread of coronavirus.
Austria is reducing income and corporate tax prepayments, deferring tax payments, allowing taxes to be paid in installments, reducing or providing relief from late tax payments, and suspending tax audits. For businesses that need to reduce working hours, labor subsidies are being provided. There is also direct aid being provided to sole proprietorships and family-owned businesses in addition to the tourism and cultural sectors.
For corporate tax payments, taxpayers can apply to have their advance payments reduced to zero or to receive a payment deferral or an installment plan. Applications can be submitted until October 31, 2020.
Value-added tax (VAT) payments can also be deferred on a case-by-case basis, and payments are not necessary while an application for deferral is pending with the tax authorities. The VAT payment due on June 30, 2020, is expected to be delayed.
Estonia has suspended interest penalties on late corporate tax payments for two months.
The country is delaying corporate income tax payments.
Ukraine will exempt imported medicine and medical devices and equipment needed to prevent the spread of coronavirus from its VAT.
Norway has reduced the employee tax rate by 4 points for 2 months. Corporations will be allowed to deduct losses in 2020 to reduce tax payments in the two previous years. The reduced VAT rate (12 percent rate) will be temporarily lowered to 8 percent, and this change is retroactive to January 1. Tax payments for VAT and advanced tax payments for other businesses will be postponed. Net wealth tax payments will be reduced for those who own stock in loss-making companies. The tax on air passenger flights is suspended from January 1 to October 31, 2020.
Luxembourg is allowing businesses to file requests for cancellation of the first two quarterly tax payments for 2020 (for corporate income and municipal business taxes), and there is a four-month deadline extension (for corporate income, municipal business, and corporate net wealth taxes) for all payments due after February 29, 2020.
Sweden is allowing businesses to reclaim tax payments that were made from January to March.
Romania will suspend most tax audits, extend the deadline for an annual profits tax from March 25 to April 25, and speed up VAT refunds to help businesses.
In Slovakia, companies and individuals will receive an automatic deadline extension of up to three months.
Portugal has suspended social security contribution payments for companies affected by the coronavirus outbreak. VAT and withholding tax payment schedules can be adjusted for businesses with less than €10 million in revenues in 2018 or a 20 percent reduction in revenues.
Poland has extended the deadline for the new SAF-T VAT regime from April 1 to July 1. The government is also allowing accelerated VAT refunds. The personal income tax deadline is extended by one month, and businesses can apply to defer social security contributions for three months. In addition to these changes, there is a roughly PLN 212 billion relief package aimed at supporting the economy and the health-care system.
The Netherlands has created a blanket three-month delay for payroll, income, and corporate tax payments along with VAT. Late payments will face a reduced interest cost of 0.01 percent. The government is also providing support for businesses that see a 20 percent reduction in revenues, at 90 percent of wage costs. There is also a €4,000 compensation payment available to businesses that were forced to close temporarily, and an expansion of government guarantees for loans to small and medium-sized businesses.
Lithuania has delayed the corporate tax and filing deadline until March 30. Businesses can revise their corporate income tax calculations based on projections for 2020 rather than the previous year’s results. Personal taxes have also been delayed from May 4 to July 1.
Latvia has extended the VAT reclaim deadline for non-EU countries, from June 30 to the end of September.
Ireland has instituted a broad relief program amounting to €3 billion. Relief includes waiving interest on late tax payments and a suspension of the relevant contracts tax. Broad lending authority and specific relief for temporary layoffs is also included. Employers who temporarily lay off their employees due to the crisis will be eligible to get a refund from the tax authority for €203 per week for payments to those laid off workers.
Iceland is postponing payment deadlines for social security taxes and public levies. Taxes that were originally due on March 16 are delayed until April 15. No penalty or surcharge will apply if the payments are made by April 15.
Hungary is providing relief for social security contributions. Employers will not be required to pay the employer side of social security contributions (17.5 percent + 1 percent) from March through June. Employees will only be liable for their 4 percent health-care contribution rather than the total 18.5 percent social security contribution.
The Czech Republic is waiving penalties and default interest for income tax payments. Late filing waivers for all taxes will be case-by-case. There is also a general waiver of penalties with respect to VAT statements.
Applications will also be considered for businesses that wish to cancel income tax prepayments, defer tax payments (for VAT or income tax), or extend their filing deadline for corporate income tax returns.
Bulgaria has extended deadlines for business taxes from March 31 to June 30. Personal income tax returns will get an extension from April 30 to June 30.
Belgium has adopted several measures to delay tax payments. Corporate and income tax payments deadlines are extended for an additional two months. There is also relief for late payments for tax liabilities prior to March 12. For businesses that demonstrate that payment difficulties are linked to the coronavirus outbreak, the government is providing a VAT payment plan that gives relief from penalties. A similar payment plan is available for payroll tax liabilities.
VAT filings have been delayed by two weeks and payments have been delayed by two months.
Australia has announced federal relief proposals that total around $189 Billion (AUD). State governments have also announced relief packages and in some cases deferrals of payroll tax payments (Australian Capital Territory, Queensland, Victoria, Western Australia).
The federal relief package includes direct payments to citizens. For job seekers impacted by the downturn, there will be payments of AUD 550 every two weeks in addition to current income support payments. The government expects these payments to cost AUD 14.1 Billion. There is also a broad-based, AUD 750 one-time payment to eligible recipients—this is expected to cost $4 billion. Individuals will also be able to temporarily access up to AUD 10,000 from certain retirement accounts.
The aid packages provide relief to businesses through subsidized loans and central bank lending, and temporary relief from insolvency laws, immediate expensing (instant asset write-off), and accelerated depreciation.
Immediate expensing will now be available for assets costing less than AUD 150,000 on a per-asset class basis. Eligibility is expanded to include businesses with annual revenues of less than $500 million (the current cap is AUD 50 million). This measure applies until the end of June.
Accelerated depreciation will be provided temporarily for businesses with less than AUD 500 Million in revenues. In addition to current depreciation deductions, the policy allows an additional 50 percent deduction but only applies to assets purchased after March 12 and put into service by June 30, 2021.
Businesses subject to the Goods and Services Tax (GST) can apply for deferred payments if they are facing cash-flow challenges. Also, businesses that receive credits or refunds under the GST can switch from quarterly to monthly filings to speed up their refunds.
New Zealand has announced the reintroduction of depreciation deductions for commercial and industrial buildings to encourage investment. In addition, the threshold for payment of provisional tax will be increased to NZ$5,000 (US$ 2,850) to reduce cash-flow pressure on small firms.
source – Bloomberg Tax