Tax issues during corona virus

Payment of Tax for Business in Coronavirus

Tax Measures in Response to COVID-19

As the new coronavirus (COVID-19) continues to spread globally, governments worldwide are trying to figure out the best way to bolster the slowing economy. In some countries, that involves tax filing and payment extensions and even temporary rate reductions. Other nations, including the United States, are just beginning to respond. So that you can focus on your family and business rather than hunt for information, we're compiling tax news related to the COVID-19 outbreak in this roundup. It will be updated regularly as more information becomes available.

For the latest international tax news related to the outbreak, see World turns to VAT cuts on coronavirus COVID-19 threat and the VATlive blog. Avalara Vice President of Global Affairs Richard Asquith has his finger on the pulse of global coronavirus-related tax relief.

Below we've broken out state sales tax relief at a glance, which gives a broad overview of the states offering filing extensions, payment extensions, or relief from penalties or interest. 

The current coronavirus crisis is producing a tremendous impact on the Spanish economy. Many companies are downsizing, and many freelancers are struggling even to earn half the income they obtained during a typical prior month. That is why the Spanish government has implemented particular business and tax measures to conceal the effects of coronavirus. In this article, we will explore all those economic policies.

The coronavirus has impacted our entire nation. Due to the quick spread of the virus, the economy has taken a hit. Business operations nationwide, particularly in small businesses, have been disrupted. Increased isolation means consumers aren't buying, and employees aren't coming into work. To combat the effects of the virus, the government is working to pass legislation that would provide businesses and workers with financial relief. In short, the coronavirus pandemic has impacted employers and employees alike. 

Click here to check out ATO updates on the Coronavirus.

The information in this article is current as of April 2, 2020, 5:32 p.m. EST; items in bold were added at this time. As new details about the pandemic and coronavirus-related legislation emerge, this article will be updated. Bookmark this page for updates!

The coronavirus has impacted our entire nation. Due to the quick spread of the virus, the economy has taken a hit. Business operations nationwide, particularly in small businesses, have been disrupted. Increased isolation means consumers aren't buying, and employees aren't coming into work. To combat the effects of the virus, the government is working to pass legislation that would provide businesses and workers with financial relief. 

In short, the coronavirus pandemic has impacted employers and employees alike. This article offers some practical guidance regarding available resources for your business and employees.

The coronavirus disease, also known as COVID-19, is a global outbreak first reported on December 31, 2019, in Wuhan, China. Symptoms of the respiratory illness include fever, cough, and shortness of breath, according to the Centers for Disease Control and Prevention (CDC). The exact number of people with coronavirus is unknown, as some people do not experience symptoms. There are, however, over 1,000,000 confirmed COVID-19 cases worldwide. On March 11, 2020, the World Health Organization (WHO) labelled it a pandemic. 

To slow the community spread of coronavirus, several states have responded to coronavirus by cancelling school, church events, community gatherings, and other large-scale events. Recently, several countries, including California, Illinois, Massachusetts, and Ohio, have closed restaurants and bars to dine-in customers. As the disease spreads throughout the United States, social distancing has become the norm, as workplaces and schools have been forced to change the way they operate.  

But with absenteeism comes increased financial strain—for both employers and employees. To help offset the effects of coronavirus, the government is working on emergency aid packages that will benefit both businesses and workers.   In President Trump's address on March 13, 2020, he declared a national emergency, saying this action will open access to 50 billion dollars for states and territories in the "shared fight against this disease." Further, individuals will have access to telehealth and accelerated coronavirus testing, including drive-thru testing. On March 14, the House passed the Families First Coronavirus Response Act. And on March 18, the package passed in the Senate and the president signed the relief package into law. On March 25, the Senate passed a $2 trillion coronavirus stimulus bill, called the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). And on March 27, the bill passed in the House and was signed into law by the president.

The IRS has established a special section focused on steps to help taxpayers, businesses and others affected by the coronavirus. This page will be updated as new information is available. For other details regarding the COVID-19 virus, people should visit the Centers for Disease Control and Prevention (CDC) for health information. Additional information about actions being taken by the U.S. government and in Spanish at https://gobierno.usa.gov/coronavirus. 

This page offers an overview of tax developments being reported globally by KPMG member firms in response to the Novel Coronavirus (COVID-19). The content will be updated daily. However, due to the fast-moving pace of change, it may not always reflect the most current developments in a given jurisdiction. Please refer to the first column of the table below for the date of accuracy and refer to the relevant links, under additional information, for source information.

Corona Virus Affecting Tax Rates

Europe

On March 25 2020, the Albanian Council of Ministers approved measures that provide special rules for judicial proceedings during the pandemic. Under these measures, hearings in administrative and civil actions are generally suspended, and the statute of limitations for filing claims, lawsuits, and appeals are similarly suspended.

Austria's Federal Ministry of Finance announced various tax relief measures in response to the COVID-19 epidemic. The tax relief measures address issues concerning both tax payments and tax return filings and include:

  • A reduction / non-assessment of Austrian income and corporate tax payments in 2020.
  • Deferral of tax payment deadlines and the introduction of an option to make tax payments in instalments.
  • A reduction or relief from penalties typically imposed for late payments of tax.
  • A suspension of tax audits.
  • Relief from interest or penalties for late payments of tax is available for taxpayers that can demonstrate that a liquidity issue is linked to the COVID-19 situation. 

On March 20 2020, the Austrian government proposed, in a draft bill, additional tax relief measures to address the implications of the coronavirus (COVID-19) on taxpayers, including the extension of deadlines for appeals, no stamp duties levied on any documents directly or indirectly related to any measures required to deal with the coronavirus crisis, contributions from the newly established "catastrophe funds" would not be subject to corporate income tax.

Value-added tax (VAT) "quick" refund mechanism established March 29, 2020, applies for all VAT taxpayers filing monthly VAT returns (including those VAT taxpayers that do not have a monthly refund license). Under the VAT quick refund mechanism, the amount of VAT credit will be refunded if, among other items, the deadline for filing the VAT return for the month of February 2020 (extended to April 3 2020) is met. A repayment based on the VAT quick refund mechanism will be made, at the latest, by April 30 2020 (instead of by May 29, 2020, for those with a monthly refund license, or by June 30, 2020, for all other VAT taxpayers filing monthly VAT returns).

In the Official Gazette of Republika Srpska ("R.S."), no. 28/20 from March 27 2020, the decision on temporary deferral of payment of tax liabilities has been enacted. The temporary postponement of payment of tax liabilities is a measure to lessen the consequences and difficulties that businesses are experiencing due to rules adopted to prevent the spreading of COVID-19 in R.S. Taxpayers that are impacted by the means and which are facing challenges in settling their due tax liabilities, were given the possibility to submit a written Statement for the temporary deferral of payment of tax liabilities in relation to:

  • Corporate income tax.
  • Fee for improvement of useful functions of forests.
  • Fee for prevention of fires.
  • Personal income tax, as per the annual tax return for 2019.
  • By the decision, the liabilities mentioned above, which are due by March 31, 2020, are temporarily postponed until June 30 2020. The responsibilities as mentioned above shall be payable after June 30, 2020, in instalments until the end of the year.
  • Correction of advance CIT payments

The Corporate Income Tax Law of the Federation of Bosnia and Herzegovina provides for the correction of corporate income tax (CIT) advance payments assessed based on the prior year's taxable profit and tax liability in circumstances of natural and other disasters. The Government of the Federation of Bosnia and Herzegovina pronounced the state of emergency caused by COVID-19 on March 16 2020. The request to reduce CIT advance payments for 2020 must be filed with the Tax Administration of Federation of Bosnia and Herzegovina, and the Tax Administration should issue its decision.  

Filing deadline extended in the Federation of Bosnia and Herzegovina to April 30 2020.

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On March 24 2020, the Tax Administration of Federation of Bosnia and Herzegovina announced the extension to, among other things, the individual income tax return filing deadline and the corporate income tax return filing deadline from the end of March to April 30 2020. The Tax Administration provided the detailed instructions on the filing mechanism by email and appealed to taxpayers not to visit the Tax Administration unless invited explicitly by the Tax Administration.

The Australian Taxation Office (ATO) will provide administrative relief for certain tax obligations (similar to assistance provided following the bushfires) for taxpayers affected by the coronavirus outbreak, on a case-by-case basis. The ATO will set up a temporary shopfront in Cairns within the next few weeks with dedicated staff specialising in assisting small businesses. Besides, the ATO will consider ways to enhance its presence in other significantly affected regions to make it easier for people to apply for relief, including reviewing further temporary shop fronts and face-to-face options.

Federal tax relief in the U.S.

On March 27, Congress passed a historic stimulus package, the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act (H.R. 748). President Trump has said he'll sign it. Relief includes direct payments to taxpayers and expanded unemployment benefits. Details will be forthcoming.

On March 20, the Treasury Department moved Tax Day from April 15 to July 15. Treasury Secretary Steven Mnuchin tweeted, "All taxpayers and businesses will have this additional time to file and make payments without interest or penalties." Initially, the payment deadline was extended, but the filing deadline remained April 15, 2020. Now the filing deadline has been reached, too.

Mnuchin is encouraging businesses and individuals to file and pay on time if they can. "We encourage those Americans who can file their taxes to continue to file their taxes on April 15, because, for many Americans, you will get tax refunds."

Individuals can defer up to $1 million of the tax due for 2019. This applies to all individual returns, including self-employed individuals and all entities other than C-corporations. For C-corporations, the extension applies to up to $10 million of the tax due. The relief also applies to the estimated tax payments for the tax year 2020 that are due April 15, 2020.

Additional relief is on the way due to the enactment of the Families First Coronavirus Response Act (H.R. 6201), which President Trump signed into law on March 18. It includes:

  • Emergency food and nutrition assistance 
  • Emergency paid sick days and leave days
  • Emergency paid leave benefits
  • Emergency unemployment insurance stabilisation and access
  • Full federal funding of extended unemployment compensation for a limited period
  • Interest-free loans for states with advances
  • Coverage of testing for COVID-19

In other news, the Federal Reserve cut its benchmark interest rate to "close to zero" during a March 15, 2020, press conference call. It expects to maintain the standard at this level until confident the economy "has weathered recent events and is on track to achieve our maximum employment and price stability goals." It's also establishing a Commercial Paper Funding Facility (CPFF) to support the flow of credit to households and businesses, and encouraging banks to "use their resources to support households and businesses."

Stopping the spread

Tax relief in Canada

Our neighbours to the north are also beginning to announce tax changes in response to the COVID-19 pandemic. Canada's working hard to slow the spread of the virus, with a mandatory self-isolation requirement now in effect for people arriving in Canada from anywhere in the World.

Federal changes include:

  • The deadline to file the individual income tax and benefit return is deferred to June 1, 2020
  • The deadline to pay any balance due for the personal income tax and benefit return for 2019 is extended from April 30 to September 1, 2020
  • The deadline to pay business income tax amounts owing after March 18 and before September 1 is extended to September 1, 2020; no penalties or interest will be assessed if your balance due is paid by September 1, 2020

Spanish economy and markets

Nearly 20.000 infected individuals. And the number does not stop growing. The current COVID-19 crisis that Spain and many other countries in the World are suffering is not just a health-related issue. It is also having a significant impact on the economy and to all of the agents that form it. Ibex 35 is falling drastically. But that seems a common trend, as many other stock indexes, like S&P, are also plummeting. That is an excellent indicator of which are the market expectations towards the current situation and how it will behave shortly.

But there is no need to look at expectations. The situation in the Spanish labour market is really complicated right now.

On the one hand, we find both big and small companies completely struggling. They are being forced to fire an essential part of their employees, both temporarily and indefinitely. That is why the government approved the possibility of doing an ERTE: temporarily laying off workers until the situation improves. On the other hand, we also find another critical group which is suffering immensely: self-employed workers. Some of them can work from home. But others, like painters of plumbers, can't. And the math is simple: if they can't work, they can't earn any income. But they still have expenses. The result? Bankruptcy.

This unprecedented situation has forced the Spanish government to act and implement drastic tax and business measures. That is what we are going to talk about in this article.

Aid for businesses 

Navigating your business is nerve-wracking enough without the added stress of a pandemic. As a result of coronavirus, many companies are hurting from slowed consumer spending, supply chain disruptions, and workplace productivity and absenteeism. According to one report, nearly 75% of companies are dealing with supply chain disruptions due to coronavirus. If you're like many small business owners, you may not have room in your budget to handle drops in revenue and provide paid sick leave to employees. Although it's easy to do, try not to panic—the government is responding to what businesses, especially small businesses, are going through. 

Low-interest loans

If you see a drop in sales, you may not have enough funds to cover business expenses like employee wages, rent, or other bills. Applying for a bank loan is one option that you have to make ends meet. 

But the added stress of a high-interest rate business loan can be a significant deterrent. To help ease this worry, President Trump announced that the government would be providing millions in more funds for federal disaster loans, backed by the SBA. 

These Small Business Administration (SBA) loans are known as Economic Injury Disaster Loans. 

Employer tax credit

On March 18, 2020, a bill proposing federally-mandated paid sick leave and paid leave benefits passed in the Senate and was signed into law. With the relief package, employers with eligible employees are required to provide paid sick leave to impacted and eligible employees for 14 days, at their regular rate of pay (max $511/day), in addition to any paid sick leave they already offer employees. And, employers are required to provide paid leave to qualify employees for three months. Employers can't change their sick-leave policies or discriminate or retaliate against employees who use it. Both types of paid time off are explained later.

To offset these paid time off costs and help alleviate some of the burdens from employers, the new legislation provides a business tax credit, equal to 100% of the benefits doled out during this time. Business tax credits directly lower a business's tax liability, dollar-for-dollar.

Self-employed individuals can also claim this tax credit if giving themselves paid sick leave.

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Keep in mind that employers who must provide paid sick and paid leave benefits do not have to pay the employer Social Security tax on those wages.

Government cash payment

Another relief measure is a stimulus check. With the CARES Act, tests will provide direct assistance to most U.S. adults, including business owners and workers alike.

This scenario began gaining bipartisan support on March 17, with the U.S. Treasury Secretary Steven Mnuchin also in favour. On March 19, the Senate GOP released their proposal containing the government-issued cash payments to U.S. adults. Again, the plan passed in the Senate on March 25 and in the House on March 27. President Trump signed the CARES Act into law on March 27. The act provides cash payments of up to $1,200 per person (up to $2,400 for couples). Fees increase by $500 per child. Individuals who earned above $75,000 in adjusted gross income (AGI) on their 2018 income tax returns will receive a lesser amount. Individuals without a federal tax liability will receive $600 under this proposal.

 

The government-issued check takes the place of a previous proposal of cutting payroll taxes temporarily. This idea was not included in the passed Families First Coronavirus Response Act, and it was not part of the Senate's stimulus plan.

Tax deferments

Another form of financial relief for businesses comes in the form of tax deferments. This includes a federal income tax deferment for employers as well as a possible Social Security payroll tax deferment. Sole proprietors, single-member LLCs, and corporations ending their year on December 31 have a business tax return deadline of April 15. 

The delay extends the April 15 deadline for businesses negatively impacted by the coronavirus—without penalties—for 90 days. The new deadline for filing federal tax returns and paying taxes is now July 15. Based on the CARES Act, corporations also have an estimated tax payment postponement until October 15. States have also implemented tax filing and payment guidelines. You can view a state-by-state tax filing guidance for coronavirus pandemic here. You would not owe penalties on your taxes if you took advantage of the federal income tax deferment.

Some cities and states are putting similar tax extensions into motion. For example, small businesses in San Francisco can defer quarterly taxes until February 2021. In addition to the federal income tax deferment, business owners are also able to postpone the employer portion of Social Security tax due to the CARES Act. Qualified companies can delay remitting their share of Social Security tax to the IRS. The employer portion of Medicare tax is due to the IRS as usual. Employers would still need to withhold and remit the employees' entire portion of payroll taxes. Employers can delay paying the employer portion of Social Security tax until January 1, 2021 (50% owned by the end of 2021 and the other half due by the end of 2022).

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