We are pleased to share our COVID-19 guide to global tax measures, which contains a high-level summary of tax-related COVID-19 measures relevant to businesses that have been announced in key jurisdictions to alleviate the economic effect of the COVID-19 outbreak.
The COVID-19 outbreak and the scale of the response from national governments is unprecedented. Tax is proving to be a key tool for government to deliver assistance and relief to businesses and to provide incentives for businesses to maintain and support their workforce through the crisis.
The landscape is moving fast and it is critical that businesses are aware and avail of the opportunities on offer. Developments are unfolding at different times in individual jurisdictions and our guide will be regularly updated to reflect the latest developments to help clients navigate the fiscal landscape during this turbulent period.
The guide currently covers Austria, Belgium, France, Germany, Italy, Luxembourg, the Netherlands, the UK and the US. The link above will always take you to the most recent version of the guide.
Key trends in COVID-19 global tax measures
From collating details of tax measures announced to date, we have been able to identify the following key trends in the COVID-19 tax measures that are being introduced around the globe.
Tax payment deferral
Many governments have announced deferral of tax payments to relieve the pressure on business cashflows during the crisis.
In some countries these deferral measures are only available in respect of specified taxes.
In some cases, the deferral is automatically available but, in a significant number of jurisdictions, the deferral measures are available only upon application and may require a business to demonstrate that it needs time to pay as a result of COVID-19 – this could put further strain on taxpayers who are already faced with reduced numbers and resources in their tax teams.
Tax credits and exemptions
Other measures introduced to bolster business cash reserves include temporary tax credits and exemptions, such as the UK 100 per cent business rates discount for the retail, leisure and hospitality sectors and the US employee retention credit.
Realisation of tax assets
Some governments are also accelerating the realisation of tax assets.
Examples include the US temporary extension to loss relief carry back, allowing losses to be carried back against profits in the previous five years thereby generating immediate cash tax refunds, and the French acceleration of the payment of R&D and VAT receivables.
The timely preparation and submission of tax returns and filings may be disrupted by employees and advisors working from home.
In some jurisdictions, including the US, Italy and Austria, filing deadlines have been extended and/or interest and penalties for late filing have been waived.
But others, including Ireland, have emphasised that returns will still need to be filed on time.
Tax enquiries and disputes/litigation with tax authorities may move more slowly or be stayed.
However, this cannot be assumed and careful monitoring of deadlines remains necessary.
Further, statutory limitation periods may be extended to give tax authorities more time to issue assessments, for example the French extension of the 31 December 2020 tax authority enquiry window.
As the landscape evolves, we expect to see more tax measures being introduced and further key trends developing.
Corporate tax residency
The wide-ranging COVID-19 travel restrictions present tax risks for groups whose employees may be forced to work in a different jurisdiction from normal or whose directors are unable to travel to attend board meetings.
Directors dialling into company board meetings from overseas could in extreme cases cause a migration of the corporate tax residency of the company, with resulting risk of ‘exit’ tax charges and/or an ongoing increased tax burden.
In addition, employees working outside their normal jurisdiction could create a taxable presence and/or tax filing obligations for their employer in their home jurisdiction. (For more detailed discussion of these issues, see our blog posts here and here.)
Some jurisdictions, including Australia, Ireland, Jersey, Guernsey and the British Virgin Islands, have published special COVID-19-related guidance, setting out the circumstances in which corporate tax residence and/or economic substance requirements will not be challenged if directors or employees are unable to travel due to COVID-19 restrictions.
The UK tax authority (HMRC) recently released guidance explaining that HMRC considers the existing UK legislative framework and related HMRC guidance relating to corporate tax residence already provide sufficient “flexibility” to deal with COVID-19 related changes to business activities and travel. However, the guidance acknowledges and expresses sympathy for the “corporate residence challenges posed by COVID-19”, which signals a commitment to pragmatism in the current circumstances. Most other EU jurisdictions are yet to comment on the impact of COVID-19 restrictions on corporate tax residence.