With the coronavirus (COVID-19) continuing to spread globally, governments in various countries are introducing support and relief to companies in an attempt to limit its impact.
Below we have highlighted some of the announcements which we think are the most important to our cross-border clients; however, the list is by no means exhaustive and advice should be sought about your specific circumstances. This is an unprecedented changing landscape for companies and their employees and whilst we endeavour to keep this page up to date with information, it is best to contact us for specific details.
Australia (latest update: 23 March 2020)
Coronavirus Stimulus Packages and Other Matters to consider
Cash Flow Assistance for Employers: Refund of PAYG Withholding
These measures are available for businesses with less than $50m AUD turnover and Not For Profit entities to boost cash flow for employers’ payments for 100% of the amount withheld up to a maximum of $50k AUD. Other measures include a minimum payment of $10k for eligible employers, even if they are not required to withhold tax.
The Australian Government has announced an increase in Instant Asset Write-off. It has also increased the threshold for Plant and Equipment from less than $30k to less than $150k from the 12 March 2020 to 30 June 2020 and increased the Business Turnover Threshold for eligible businesses from $50m to $500m.
Supporting Apprentices and Trainees
Employers who meet certain criteria and employ apprentices or trainees will be eligible for a subsidy of 50% of their wage paid during the 9 months from 1 January 2020 to 30 September 2020. Employers will be reimbursed up to a maximum of $21k per eligible apprentice or trainee ($7k per quarter). Employers can register for the subsidy from early April 2020.
Pension payments have been halved with the Government temporarily reducing the drawdown requirements from Account-Based Pensions and similar products by 50%. This reduction will apply for the 2019-20 and 2020-21 Financial Years. The minimum pension requirements will range from 2% to 7% depending on the age of the member. Eligible individuals will be able to access up to $10k of Superannuation in 2019/20 and a further $10k between July 2020 and approximately September 2020. The exact timing is to be determined. Eligible individuals include those that are unemployed, receiving particular welfare payments, employees who have been made redundant or had their working hours reduced by 20% or a sole trader whose turnover has decreased by 20% or more. No tax will be imposed on the withdrawals and it will not impact on Centrelink or Veteran’s Affairs payments.
Welfare recipients will receive two $750 payments to be made in March 2020 and July 2020. Social Security Deeming Rates have now been lowered. Income Support payments eligibility will be temporarily expanded for 6 months. A six month Coronavirus supplement of $550 per fortnight will be paid to existing and new recipients of eligible payment categories. Eligible Categories are: Jobseeker Payment, Youth Allowance Jobseeker, Parenting Payment, Farm Household Allowance and Special Benefit Recipients.
The Australian Government has agreed to guarantee unsecured loans by 50% for Small and Medium sized Enterprises (SMEs) with turnover up to $50m. The maximum loan amount will be $250,000 over a 3 year term with a 6 month repayment holiday. In addition, The Australian Banking Association have stated that all small business impacted by the Coronavirus pandemic will be able to access a six month deferral of all loan repayments.
Changes are being made to Bankruptcy Rules to relieve pressure on Directors and Business Owners.
Australian Taxation Office (ATO)
If you or your business has been affected by COVID-19, the ATO can work with you to defer some payments and vary instalments due, by up to six months. These include your income tax, activity statement, pay as you go (PAYG) instalments, Fringe Benefits Tax (FBT) and excise payments.
If your turnover is less than $20m, you report quarterly and you usually have a net GST credit, you can change your reporting cycle to monthly to expedite your refunds.
If you are a quarterly PAYG instalment payer, you can vary your March 2020 quarter instalment rate or amount and claim amounts already paid in September 2019 and December 2019 quarters.
If your business is affected by COVID-19, the ATO will consider remitting interest and penalties incurred after 23 January 2020.
If you have Superannuation Guarantee obligations, they must be paid within 28 days of the end of the quarter or you will be liable for the Superannuation Guarantee Charge.
Victorian Government Stimulus Package
Concessions are available if your annual payroll is less than $3m. The Victorian Government will provide full payroll tax refunds for the 2019-20 financial year and permit a deferral of payroll tax for first three months of the 20/21 Financial Year until January 2021.
2020 Land Tax payments will be deferred for eligible small businesses and a waiver has been agreed for Liquor Licensing Fees for 2020 for affected venues and small businesses. A Business Support Fund has also been introduced to provide $500m to support businesses in the hardest hit sectors and commercial tenants of Government buildings can apply for Rent Relief.
China (latest update: 13 March 2020)
Individual Income Tax Annual Filing (“IIT annual filing”) may be postponed
Because of the outbreak of COVID-19, the first IIT annual filing under the new IIT policy that should have started on 1 March 2020 may now be postponed. The Tax Bureau has published a letter to Withholding Agents, suggesting they avoid going to the Tax Bureau if there is no special situation and if there is a special situation, to make a reservation online first. The Tax Bureau will lead taxpayers to conduct IIT annual filing in batches.
Although the IIT annual filing is delayed, the Tax Bureau doesn’t mention whether the filing deadline will be extended.
Although the IIT annual filing obligation is on individuals, employers may assist employees in completing the returns.
Social Security and Housing Fund Contribution
Local social benefit incentives have been announced by many cities which include:
- During the period of February to June 2020, small and medium enterprise (SMEs) in provinces except Hubei will be exempt from paying premiums on pension, unemployment and work injury insurances.
- For large companies, the payment of the above three social insurances will be halved during the period of February to April 2020.
- Companies can also apply for deferred payment of related contributions when certain requirements are met.
- Company size is determined by the social security system according to the information shared among the Tax, Finance and Statistical Bureaus; however, companies can apply to re-classify their size if they don’t agree with the pre-determined one.
Denmark (latest update: 13 March 2020)
The Danish Government has declared that it is to decide on laws that will extend and postpone payments of taxes including Value Added Tax (VAT).
France (latest update: 24 March 2020)
Several measures have been decided by the banks, in conjunction with the exceptional public support measures for businesses including the introduction of fast track credit appraisal procedures for tight cash flow situations and special attention to emergency situations. It may also be possible to defer loan repayments for businesses for up to six months and penalties and additional costs of deferrals and credit extensions for businesses have been eliminated.
Payment Deadlines for Tax and Social Security Payments
It has been announced that all companies will be able to postpone the payment of tax and social security contributions without justification, formality or penalty. In addition, all employers with a due date of the 5th or 15th of the month may postpone all or part of the payment of employer and employee contributions.
Direct Tax Rebates
Companies in difficulty can request a rebate of all or part of their charges to deal with the crisis. Requests must be sent to the Corporate Tax Department with each request assessed according to the individual company’s situation.
Support from the State and the Banque de France (Credit Mediation)
In the event of difficulty in negotiating a deferment or in obtaining financing, companies should be referred to the Credit Mediation Service which is a free confidential service available to all.
Netherlands (latest update: 21 March 2020)
Deferral of Payment
Entrepreneurs who are experiencing problems effecting payments or later find themselves in that situation are eligible to request special permission to defer payments of income tax, corporate income tax, turnover tax and wage tax.
Reducing the Provisional Corporate Income Tax Assessment 2020
In respect of corporate tax, companies with estimated turnover and taxable profits in 2020 that have been revised downwards are eligible to request a reduction of the provisional assessment for 2020 by submitting their application electronically in the usual way.
Value Added Tax (VAT)
In most cases, VAT on expenses is tax deductible for entrepreneurs. In some cases, this applies to cancellations too. Entrepreneurs who have incurred expenses for activities that have subsequently been cancelled are advised to document those expenses and to find out whether the VAT is tax deductible.
Companies that have already paid VAT but have not been paid by their customers can reclaim the VAT under “irrecoverable debtors” once it is established that the company will no longer be paid. In practice, it can be difficult to determine when a debtor will pay or whether they will not pay at all. Whatever the situation, a right to reclaim VAT is deemed to exist one year after the time at which the payment falls due.
Companies can change their tax period for VAT purposes. It may be advisable for companies which anticipate a need to reclaim VAT to submit returns on a monthly basis. In addition to requesting a deferral of payment, companies that anticipate that they will need to pay VAT may find it sensible to switch to quarterly returns.
Government Guaranteed Loans
By the end of March 2020, the Dutch Ministry of Economic Affairs and Climate Policy aims to have implemented a temporary expansion of the scheme for government guaranteed loans to SMEs (‘Borgstelling MKB-kredieten’ – (BMKB). Under this scheme, companies will be able to increase their bank loans faster or obtain a connection loan from the bank.
Temporary Emergency Bridging Measure for Sustained Employment (NOW)
The NOW scheme is designed to prevent as many employees as possible from being laid off and will be open to companies which expect to experience at least 20% of revenue loss. These employers can get a three month employment cost allowance with a maximum of 90% related to the revenue loss percentage. An additional allowance period of three months (six months in total) could be granted upon request too. A crucial criterion for the application of this scheme is for the employer to NOT apply for redundancy permits on economic grounds, during the application of this scheme. Employers must continue to pay wages in full to their employees during this period.
New Zealand (latest update: 17 March 2020)
The Government has announced a $12.1b NZD spending package to help the economy, including $8.7b in support for businesses and jobs. Additionally, a wage subsidy for employers for up to 12 weeks and up to $150k (per business) if they have suffered a 30% decline in revenue compared to last year has been introduced. This comprises $585 a week for full time workers and $350 a week for part time workers, available to all including the self-employed.
Leave and self-isolation support for eight weeks for people with COVID-19 either for those caring for people with it or for those in self-isolation has been granted, which will be for up to eight weeks at the same rates as the wage subsidy but it is not available for those who can work from home.
The provisional tax threshold will lift from 1 April 2020 from $2.5k to $5k allowing an estimated 95,000 businesses to defer tax payments and possible waiving of interest on late payments. The package also allows the Commissioner of the Inland Revenue to cancel the use of interest on underpayments of tax for taxpayers unable to pay tax on time due to the outbreak.
The allowance to expense low value asset purchases has been increased from $500 to $5k from 1 April 2020 for a one year period, with a $1k allowance after that.
There has also been a reinstatement of depreciation deductions for commercial and industrial buildings at a rate of 2% diminishing value. This will apply from 1 April 2020 and will cost an estimated $2.1b up to 2024.
Portugal (latest update: 13 March 2020)
The Portuguese Government announced the postponement of the Corporate Income Tax return to 31 July 2020, as well as the first instalment of special payment on account, to 30 June 2020 and the first installment for payment on account and additional payment on account to 31 August 2020.
Spain (latest update: 18 March 2020)
All companies have been requested to set up teleworking for employees in all cases where this is feasible. Broader conditions have been introduced for employees to request revisions to work time or reduced hours even up to 100% in order to prevent dismissal for absenteeism due to family care derived from COVID‐19 isolation at home.
Employees have the right to payment of unemployment subsidies and the usual time limit to apply for unemployment benefit for employees has been deferred.
Employers can avoid paying social security contributions by 100% for companies with fewer than 50 employees or 75% otherwise, provided the employee remains with the company for at least a period of six months once activity starts again.
Sweden (latest update: 14 March 2020)
No guidelines have been issued yet; however, there is a possibility for companies to get a deferment of payment of preliminary income tax and social security charges is being discussed and will likely be implemented.
Switzerland (latest update: 13 March 2020)
A temporary reduction in operational working hours called “zero working hours” (including the complete cessation of work for a certain period of time) has been introduced. This can apply to the entire company or to selected departments. Reductions in remuneration for employees will be made up by the government to some extent and under certain conditions, employees subject to “short time work” may be eligible for “short time work allowance” as part compensation for lost wages.
Short term working arrangements must be implemented following strict guidelines, so advice should be sought regarding your specific circumstances.
United States (latest update: 19 March 2020)
The US Department of the Treasury (Treasury) and the Inland Revenue Service (IRS) have extended the 15 April tax payment deadline to 15 July 2020.
This extension applies only to federal income tax payments due for a taxpayer’s 2019 tax year, including tax on self-employment income. Estimated federal income tax payments due on April 15, 2020 regarding a taxpayer’s 2020 taxable year, also qualify for the 90 day extension. The dollar amount thresholds ($1m USD for individuals and $10m for corporations) apply in the aggregate to all types of federal tax payments.
Several states are also announcing extensions to state tax filing and payment deadlines. California is granting a 60 day delay (until 15 June) for individuals and businesses unable to file on time due to the COVID-19 outbreak. Maryland has extended the due date for business returns to 1 June and indicated the state will follow any federal extensions granted by the IRS. Colorado, Indiana, Michigan and Ohio also have indicated they would follow IRS guidelines and federal extensions. The American Institute of CPAs is keeping an updated list of state tax developments and extensions.
For more information on global efforts to minimise the effects of Coronavirus (COVID-19) please contact us.