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Brexit and Covid and Tax, Oh My!

Kitty Miv, Editor
04 January, 2021

As we come towards the end of the year with a seemingly resurgent pandemic on our hands, but with hope in the form of a vaccine on the horizon, at least one thing seems to have changed as we head into 2021, namely that the UK and the EU have finally reached agreement (after a fashion, anyway...!) on the shape of their tax, trade and general economic relationship following the ending of the Brexit transition period on January 1, 2021.

The European Union and the United Kingdom on December 24, 2020 announced an agreement on maintaining tariff-free trade, just a week before the end of the Brexit transition period.

The agreement avoids a disorderly exit for the UK from the European Union and averts the imposition of new non-tariff and tariff barriers on UK-EU trade from 2021. Without the agreement, trade would have been subject to base-level tariffs established under World Trade Organization rules.

The deal includes protections to ensure a level playing field between the European Union and the UK, including on tax. Failure to abide by the conditions in the agreement would enable either side to introduce tariffs on the other party.

Elsewhere in the world (and side-stepping for this week the ongoing situation regarding the COVID-relief package in the United States, which was unresolved at the time of writing), the focus was once again on the Coronavirus, and on related tax measures.

In Kenya, for example, a decision was made to reverse COVID-19 rate cuts, with the Government confirming that it would cease to offer a number of temporarily reduced tax rates from January 1, 2021.

The corporate tax rate for resident businesses and the top rate of individual income tax reverts back on that date to 30 percent from 25 percent, and the standard rate of value-added tax to 16 percent from 14 percent.

The OECD, meanwhile, has released new guidance for multinational groups and tax agencies on the impact of the COVID-19 pandemic on transfer pricing compliance matters.

The new report, titled 'Guidance on the Transfer Pricing Implications of the COVID-19 Pandemic', is intended to address practical questions relating to transfer pricing and is part of the BEPS Inclusive Framework's commitment to improving tax certainty.

The OECD explained that the guidance is intended to aid both taxpayers in reporting the financial periods affected by the pandemic and tax administrations in evaluating the implementation of taxpayers' transfer pricing policies. The Guidance provides clarifying comment on, and illustrations of, the practical application of the arm's length principle in four priority issues, identified in consultation with Business at the OECD (BIAC): comparability analysis; losses and the allocation of COVID-19 specific costs; government assistance programs; and advance pricing agreements.

In Ireland too, the emphasis was on guidance, albeit more at the ground level, with additional information released by the Irish authorities as to how businesses can apply for the COVID Restrictions Support Scheme (CRSS).

Ireland moved to the highest level of restrictions as of December 24, 2020. Under CRSS, businesses whose trade has been significantly impacted or who have temporarily closed as a result of COVID-19 health restrictions can apply to Revenue for a cash payment in respect of an advance credit for trading expenses for the period of the restrictions.

Revenue explained that businesses affected by the tightening of restrictions can make a claim for a CRSS payment, subject to a maximum of EUR5,000, for each week they are affected by the restrictions. Such businesses also qualify for the additional seasonal CRSS payment for a period of three weeks beginning December 21, 2020.

Finally this week, the Jersey Government announced new fiscal supports for hospitality, gyms, and other businesses that are affected by heightened COVID-19 restrictions.

The Government has enhanced its COVID-19 wage subsidy, the Co-Funded Payroll Scheme (CFPS), and has announced new tax payment deferrals.

Businesses that have had to close will be eligible to defer their fourth quarter GST and Social Security contributions for up to two years. Those businesses that need further time to pay any outstanding GST and Contributions for quarter three will also have up to two years to make their payment.

And on that note, I wish you a happy and healthy start to the New Year.

Until next week!


About the Author

Kitty Miv, Editor

Kitty was born in Argentina in 1960 to a Scottish cattle rancher and his Argentine wife. Educated in Edinburgh and at Princeton, Kitty worked for the World Bank as an economist, where she met and married an emigre Iranian banker. During her time with the Bank, Kitty worked in a number of emerging markets, including a spell in the ex-USSR as a Transition Economies Team Leader. Kitty is now a consultant in Brussels and has free-lance writing relationships with a number of prominent economic publications. kitty@lowtax.net


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