Based on the information available as of today, please find below an update regarding the exceptional tax measures implemented in France, Germany, United-Kingdom and United-States to support companies and business in the COVID-19 context.
FRENCH TAX MEASURES
Tax deferral payment
Companies may request from the corporate tax department (SIE) the deferral of March (quarterly) installment payment for direct tax payments (corporate income tax, payroll tax, business tax (CFE/CVAE) in case of monthly payments) without penalty and interest for late payment. In this case they can block their payments due in March, by blocking their SEPA direct debit at their bank, or ask for refund if payment is already made. This deferred payment does not apply to indirect tax payments, mainly VAT.
If the difficulties cannot be resolved by a settlement plan to spread or defer the payment of the tax debt, companies in the most difficult situations can ask a remission of direct taxes. The benefit of such tax relief is subject to an individual examination taking into account the financial difficulties (and link with COVID-19).
Early repayment of tax credit
The French tax authorities were also instructed to accelerate the repayment of tax credits (VAT, R&D credits).
Tax audit and tax litigation
Pending tax audits are suspended and there will be no procedural action unless a statute of limitation or deadline required by law. There will be no new tax audit.
GERMAN TAX MEASURES
Application for tax deferral payments
The German Federal Ministry of Finance has issued a decree on 19 March 2020 with concrete measures regarding income taxes and corporate income (including solidarity surcharges), wage taxes and VAT. The common decree by all federal states dated also on 19 March 2020 accompanies these measures for trade taxes levied by municipalities in Germany. There is no limitation/cap on these measures in terms of amounts but in terms of the due dates as follows:
- For taxes that are already due or will fall due until 31 December 2020 a deferral can be applied under relieved conditions;
- a significant or undue hardship of such tax payment for the tax payer shall not be subject to the ordinary requirements for such proof any longer; in particular a proof of already incurred or impending damages is not required;
- generally, no interests (legally 0.5% per month) on deferred tax payments will be imposed;
- in addition to that tax payers can apply for amended (reduced) advanced tax payments for income and trade taxes (usually four fixed installments per year);
- the measures above shall only apply for tax payers who are impacted directly and significantly (please mention: there is no definition for “significantly” available yet); this needs to be discussed and assessed with the local tax authorities on an individual basis;
- applications for deferred payments regarding taxes that will fall due after 31 December 2020 need to be substantiated by particular and extended reasons for the need of such long-term deferral;
- for withholding taxes (wages taxes and withholdings on interests, dividends etc.) already withheld by the tax payer for the benefit of third parties the principles above do not apply; such tax payments need to be paid according to the regular provisions and on the regular due dates.
Relief from assessments for late payment charges
Late payment charges for taxes incurred and assessed until 31 December 2020 shall be relieved by the local tax authorities. The federal states are entitled to circulate general regulations for this.
Waiver regarding enforcement measures
Any enforcement measures by the tax authorities for taxes already due or falling due until 31 December 2020 shall be waived.
No application for only indirectly affected tax payers
The relief and waiver rules set out before shall not be applied on tax payers who are only indirectly affected.
UK TAX MEASURES
The UK Government has announced a package of initiatives to support businesses including the following tax related measures:
- Businesses will be able to defer VAT due in the period from 20 March to 30 June 2020 until the end of the 2020 to 2021 tax year.
- Self-employed income tax payments due in July 2020 under the UK Self-Assessment system will be deferred until January 2021. No penalties or interest for late payment will be charged in the deferral period.
- All businesses and self-employed people in financial distress, and with outstanding tax liabilities, may be eligible to receive support with their tax affairs through HMRC’s Time To Pay service on a case-by-case basis.
- Retail, hospitality, leisure businesses and children’s nurseries in England will be given a business rates holiday for the 2020 to 2021 tax year.
U.S. TAX MEASURES
The U.S. Internal Revenue Service (IRS) has extended the due date both for filing federal income tax returns and for making certain federal income tax payments as part of the federal government’s relief efforts in response to the coronavirus pandemic. Generally, the deadline for filing federal income tax returns for the 2019 taxable year falls on April 15, 2020. The IRS has deferred this deadline until July 15, 2020, which means that all taxpayers (including both individuals and corporations) may defer filing their returns without penalty. In addition, any federal income tax payments (including payments of self-employment tax) with respect to the 2019 taxable year that were originally due on April 15, 2020 will now be due on July 15th. This payment relief also is available to taxpayers making federal estimated income tax payments for the 2020 taxable year (including payments with respect to self-employment tax) that were originally due on April 15, 2020. No interest or penalties will apply to deferred tax payments.
Importantly, both the filing and payment relief only apply with respect to federal income tax. This relief does not extend to federal non-income taxes or to other non-income tax information returns. Although earlier guidance released by the IRS had imposed limits on the amount of tax that could be deferred (generally US$10 million and US$1 million for corporations and non-corporate taxpayers, respectively), the most recent IRS guidance released on March 20th explicitly states that there is no limitation on the amount of the payment that may be postponed.
Several large states such as California and New York have either matched the filing extension or indicated that they will do so. However, not all states have done so. States which do not extend their own filing deadlines to July 15 will eliminate much of the benefit conferred by the federal extension as most state income taxes are based primarily on federal income tax calculations.
The IRS’s action came in response to an emergency declaration released by President Donald Trump on March 13 pursuant to the Robert T. Stafford Disaster Relief and Emergency Assistance Act and is part of a broad effort by the federal government to provide emergency assistance to Americans, as well as to state and local governments. We are continuing to monitor these developments and will provide further updates if any further significant tax guidance is released.