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Governments Look To The Future

16 June, 2020

Last week we took a break from all things COVID-19 related, but as this week saw the welcome news that New Zealand has tentatively declared itself free from the virus, we shall return to the topic, and the measures being undertaken by national governments, no doubt fervently hoping that they too will be in such a position in the near to medium-term future, and with an eye to the state of their economies when they attain that goal.

As detailed in previous columns, a number of countries have opted to defer deadlines, suspend late payment penalties, and offer other such administrative tweaks for businesses struggling as a result of the pandemic.

France, for example, recently announced an extension of the installment payment deadline for the corporate tax (IS) and the contribution on added value (CVAE), whilst the Belgian Ministry of Finance announced that the deadlines for the reporting of cross-border tax planning schemes will be delayed by six months.

The sixth European Union Directive on Administrative DAC6 (EU Directive 2018/822) requires intermediaries – such as tax advisors, accountants, banks, and lawyers – to report relevant arrangements before they are used, and the rules governing this are set to enter into force on July 1, 2020, and apply to reportable arrangements dating back to June 25, 2018. However, under a political agreement reached within the EU, member states have the option to postpone these deadlines by six months, which is what the Belgian authorities have opted to do.

The US Internal Revenue Service, meanwhile, reminded overseas taxpayers living and working abroad that they have an extra month to file their 2019 federal income tax return and pay any tax due. This includes Americans who live and work abroad, non-resident aliens and foreign entities with a US filing and payment requirement.

The deadline for these taxpayers is normally June 15. However, it has been extended to July 15 as part of the various COVID-19-related tax relief measures announced by the Treasury Department and the IRS in April 2020.

Elsewhere in the Americas, the Bolivian authorities announced that they would be allowing corporate taxpayers, except the country's largest businesses, more time to file their corporate income tax return and pay amounts owing.

The Government revealed that it would further delay the corporate tax return filing deadline from May 29, 2020, to July 31, 2020, for all taxpayers but the largest taxpayers. The standard deadline was April 30, 2020.

Additionally, taxpayers will be allowed to pay in four installments, providing that 50 percent of the tax due is paid by July 31, 2020.

However, not content with tinkering around the edges, Germany's COVID-19 EUR130bn fiscal stimulus package, unveiled on June 3, is more ambitious in scope, containing plans to lower its value-added tax rates.

Under the plan, the standard rate of value-added tax will be reduced from 19 to 16 percent for the period from July 1 to December 31, 2020. The reduced seven percent rate will also be cut, to five percent, during the same period.

Separately, the upper house of the German parliament, the Bundesrat approved legislation providing for a temporary value-added tax cut for the catering sector. The measures had previously been approved by the lower house, or Bundestag. Under the plan, the newly further reduced rate of VAT will apply to food served in restaurants and cafes in the period from July 1, 2020 to June 30, 2021. Such supplies were previously taxed at the standard rate.

A number of recently announced budgets also contained COVID-19 mitigation measures, including in Finland, where a fourth supplementary Budget was unveiled on June 2 which includes a value-added tax exemption on sales of personal protective equipment (PPE) to health and social care sectors.

Under the Budget measure, supplies of PPE intended to be used for coronavirus-related prevention, testing and care will be exempt from VAT for the period from January 30 to July 31, 2020, subject to certain conditions.

In Hungary, meanwhile, the Government submitted its Budget for 2021 to Parliament, which included tax relief measures aimed at businesses, principally:

  • The extension of the abolition of advance corporate tax top-up payments to the local business tax. Corporate tax top-up payments were abolished in 2019; and
  • An expansion of the "development reserve" rules, under which companies intending to invest in Hungary can set aside a portion of their profits for the year for reinvestment, with this reserve not subject to corporate tax.

Cyprus has also unveiled a number of COVID-19 reforms, including a value-added tax rate cut for tourism accommodation providers and restaurants.

From July 1, 2020, until January 10, 2021, tourist accommodation and catering services will be subject to a five percent rate of VAT, down from nine percent.

Additionally, the Government has announced that the deadline for personal income tax returns for salaried persons and payment would be extended until October 31, 2020.

Until next week!


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