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Corporate Tax Moves Continue Apace

Kitty Miv, Editor
31 August, 2020

Well, we've been all over the place tax-wise in recent weeks, looking among other things, at COVID-related measures, and indirect tax pushes by national governments. In this week's column though, the focus is firmly on matters relating to corporate taxes, starting with the suggestion by Donald Trump that the United States could introduce tax credits to encourage companies to relocate to the US from China.

During a speech on August 17, 2020, and ahead of the Republican National Convention, Trump suggested that his administration intends to end America's "reliance on China."

He announced that: "We will create tax credits for companies that bring jobs back from China to America," although he did not provide further details regarding the proposed tax credits.

Meanwhile, the French authorities have been looking to bolster the country's small business sector, and have announced a scheme to allow small companies to request a specific settlement plan for the payment of their taxes.

The scheme, unveiled by the General Directorate of Public Finance is aimed at micro-, small- and medium-sized firms and sole traders particularly affected by the economic consequences of COVID-19, and covers VAT and withholding tax due for the months of February to April 2020, which should have been paid from March to May 2020. It also covers balances of corporate tax and contribution on added value (CVAE), which was due to be paid between March and May 2020.

Tax debtors will be allowed up to 36 months to pay the tax debts.

Those claiming the relief must have started their business activity no later than December 31, 2019, and must be up to date with their tax reporting obligations. They must employ fewer than 250 employees on the date the claim is made. Their turnover for the last financial year must not have exceeded EUR50m and they must not have a balance sheet total in excess of EUR43m.

Panama has also had an eye to the protection of SMEs, with its Parliament considering changes to income tax rates for small- and medium-sized businesses, under the auspices of Bill 358.

The Bill provides for reduced rates of corporate tax for SMEs that are registered in the business registry, do not have gross annual income in excess of PAB500,000, and are owned (directly or indirectly) by natural persons. However, the legislation includes provisions to deny access to the concessionary rates where businesses are artificially split to meet these conditions.

The proposed rates are as follows:

  • Net taxable income up to PAB11,000: 7.5 percent;
  • Income exceeding PAB11,000 and up to PAB36,000: 10 percent;
  • Income exceeding PAB36,000 and up to PAB90,000: 12.5 percent;
  • Income exceeding PAB90,000 and up to PAB150,000: 15 percent;
  • Income exceeding PAB150,000 and up to PAB350,000: 20 percent; and
  • Income exceeding PAB350,000 and up to PAB500,000: 22.5 percent.

In Greece, the Government announced further detail on COVID-related supports for corporate taxpayers across the board, with companies that saw their turnover fall during the first half of this year, compared with 2019 levels, permitted to reduce advance tax payments paid this year for 2021.

The concession, which was initially announced by Greece's deputy Minister of Finance, Apostolos Vesyropoulos, at the start of this month allows taxpayers to reduce their advance payments this year depending on the extent their sales have declined on a year-on-year basis, as recorded in VAT returns that were due to be submitted by July 31.

The reference period is the first half of 2020, compared with the first half of 2019.

Businesses will be allowed to reduce their advance tax payments by 30 percent if they experienced a year-on-year decline of at least five percent.

Those businesses who saw their turnover decline by more than 15 percent may reduce their advance tax payments further, as follows:

  • by 50 percent, if their turnover fell by more than 15 percent and up to 25 percent;
  • by 70 percent, if their turnover fell by more than 25 percent and up to 35 percent; and
  • by 100 percent, if their turnover fell by more than 35 percent.

Air transport and shipping businesses will not be required to pay advance tax payments, and businesses not obligated to file a first-half VAT return and "seasonal businesses" may benefit from a 50 percent reduction.

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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