Preferential Tax Measures to Support the Development of SMEs

updated:2020-09-14    

Introduction

 

This paper focuses on the preferential tax measures adopted by BRITACOM jurisdictions that consist of 36 Council Member Tax Administrations and 28 Observers. The aim is to provide suggestions about supporting the work resumption of SMEs and reducing the negative impact of the COVID-19 pandemic. The material in this paper is mainly selected from www.britacom.org, www.OECD.org, www.IBFD.org, official website of BRITACOM jurisdictions, and etc.

 

Hit by the COVID-19 pandemic, the global economy is now experiencing a deep recession, which has brought a huge impact on many market entities, especially small and medium-sized enterprises (SMEs). As the driving force of economic development in various economies, SMEs have played a dynamic role in supporting economic growth, expanding employment, and promoting innovation. With growing awareness of the vulnerability of SMEs during the pandemic and their importance to social stability, BRITACOM jurisdictions that consist of 36 Council Member Tax Administrations and 28 Observers have introduced a series of preferential tax measures to support the resumption of activities of SMEs and reduce the impact of the pandemic on production and operation.

 

1. Tax policy

 

1.1 Cambodia

 

February 25. Corporate income tax (CIT) waiving for 4 months from February to May 2020 for hotels and guesthouse businesses operating in Siem Reap Province (tourist town).

 

March 24. Allow tax deductions for any seniority indemnity payments in the Tax on Income of any enterprises.

 

March 30. CIT waiving for 3 months from March to May 2020 for hotels, guesthouses, restaurants and travel agencies operating in Phnom Penh, Siem Reap, Sihanouk, Kep, Kampot, Bavet and Poipet.


1.2 Cameroon

 

April 30. A set of measures provide temporary tax accommodation to businesses directly affected by the crisis through tax moratoria and deferred payments, notably (i) exemptions from the tourist tax in the hotel and catering sectors for the rest of the 2020 financial year; (ii) exemption from the withholding tax for taxis and motorbikes and petty traders for the second quarter.

 

1.3 Congo

 

April 10. CIT has been reduced to 28 percent from 30 percent and the turnover tax has been reduced to 5 percent from 7 percent for small businesses with turnover below 100 million XAF.

 

1.4 Hungary

 

Around 80,000 SMEs (mainly in the services sector) will be exempt from the small business tax (the payment of the tax by other companies in affected sectors will be deferred until the end of the state of emergency).

 

1.5 Nepal

 

May 28. The Finance Minister Dr Yubaraj Khatiwada presented the federal Budget for the fiscal year 2020/21 in the joint session of the House of Representatives and National Assembly. The total Budget is estimated at 1,474.64 billion NPR of which regular expenditure, capital expenditure and financing provisions are 948.94 billion NPR, 352.91 billion NPR, and 172.79 billion NPR, respectively. Estimates of sources of financing include 889.62 billion NPR of revenue, 60.52 billion NPR of foreign grants, 299.5 billion NPR of foreign loans, and 225 billion NPR of domestic loans.

 

1.6 Indonesia

 

April 27. The Government will borne 0.5% of the final income tax on the SMEs' tax whose annual turnover are up to 4.8 billion IDR(30 million EUR).

 

CIT will be reduced from 25% to 22% for financial years 2020 and 2021, and 20% for financial year 2022 onwards to protect the business from liquidity problems.

 

Imports duties can be exempted for companies engaged in one of 102 business fields and/or designated as KITE (Import Facility for Export Purposes (Kemudahan Impor Tujuan Ekspor)) companies until September 30, 2020.

 

A 30% reductions on monthly tax instalment payment for companies engaged in one of 102 business fields and/or designated as KITE (Import Facility for Export Purposes (Kemudahan Impor Tujuan Ekspor)) companies until September 30,2020.

 

On request by the taxpayer, a 30% reduction in the monthly CIT instalment (i.e. the advance payment) will be provided. This measure will apply for the fiscal period ending on September 2020.

 

1.7 Italy

 

March 17. Introduction of several tax credits:


- 60% over the rent paid by retailers during March 2020.
- 50% over the total amount of expenditures incurred to sanitize firms, stores and working tools. This tax credit has been extended to personal protective equipment by the April 8th decree. This tax credit is extended to personal protective equipment by the April 8th decree.
- 30% over total investments concerning advertising in the publishing sector.
- 20% computed based on taxes paid in advance by firms and referred to forthcoming revenues, in the case in which the advance payments no longer correspond to actual profits/ revenues.

 

April 8. Self-employed revenues and fees are exempted from tax advance payment duties in the period March 17, 2020 - May 31, 2020. The allowance is applied to self-employed with a revenues level lower than 400,000 EUR in 2019.

 

1.8 Kazakhstan

 

March 30. The property tax rate will be reduced to 0% for property used in tourism, catering and the hotel sector.

 

1.9 Korea

 

March 17. Doubled special tax cuts for SMEs in infected areas. The maximum rate of special tax reduction will be doubled (from 15% to 30%) for SMEs in Deagu, Gyeongsan, Bonghwa, and Chungdo. This will reduce income tax or corporate tax by 60% for small businesses and 30% for medium businesses. It applies to all industries except the speculative entertainment, bar, real estate rental business, etc.

 

March 17. In the case where the leaseholder voluntarily reduces the rent to a small merchant tenant, a tax amount equivalent to 50% of the reduction of the rent in the first half of 2020 will be deducted from income tax or corporation tax.

 

March 17. The turnover threshold for the application of the simplified VAT regime for small businesses has been increased from 30 million KRW to 80 million KRW until the end of 2021. In addition, businesses with a turnover below 48 million KRW will be exempt from VAT during the period.

 

April 29. Early refund from loss carryback for a SMEs- Refunds from loss carryback are usually given after the end of one business year, but this refund will be made within this year for the loss of the first half of 2020.

 

1.10 New Zealand

 

April 15. Temporary tax loss carries back: Businesses expecting to make a loss in the 2019/20 or 2020/21 year can use it to offset profits in the previous year - allowing otherwise profitable firms to cash out their losses.

 

April 15. Announcement of future changes to the tax loss continuity rules: Currently the tax asset associated with a loss is extinguished if over 51% of the shares of the firm change hands after the loss occurs. There will be a shift to a "same or similar" business test for the ability to carry forward losses, which will be available from the 2020/21 tax year.

 

1.11 Peru

 

May 9. Business can carry-forward their losses derived during the fiscal year 2020 to set off the profits for the following 5 years, computed from 2021.

 

1.12 Qatar

 

March 16. Qatar’s 75 billion QAR (20.6 billion US$ or about 13 percent of GDP) package to reduce the effects of COVID-19 was announced on March 16. The program aims at shoring up small businesses and hard-hit sectors (hospitality, tourism, retail, commercial complexes, and logistics), including through six-month exemptions on utilities payments (water, electricity). Logistics areas and small and medium industries are exempt from rent payments for six months.

 

1.13 Sierra Leone

 

April 22. The authorities’ Quick Action Economic Response Program (QAERP) seeks to mitigate the broader social economic impact by: ensuring a stable supply of essential commodities and food; providing support to SMEs.

 

1.14 Singapore

 

February 18. 15% property tax rebate for Changi Airport was confirmed, as well as full month of rental waiver to stallholders in NEA-managed hawker centers and markets. Other government agencies, such as the Housing and Development Board (HDB) will provide half a month of rental waiver to its commercial tenants.


1.15 Tajikistan

 

May 6. Time-bound tax holidays and relief to targeted industries and small businesses until September 1, 2020.

 

1.16 Ukraine

 

March 20. Making private entrepreneurs eligible for the state support for children younger than 10. The latter program has so far cost 1.1 billion UAH, half of which has already been spent.

 

2.Tax administration

 

2.1 Algeria

 

July 14. In response to the economic impact on household and enterprises of the lockdown measures, the authorities also announced that: the declaration and payments of income taxes for individuals and enterprises have been postponed, except for large enterprises.

 

2.2 Angola

 

Property tax can be paid in four installments.

 

2.3 Armenia

 

Lump-sum transfers to the vulnerable including individuals who were unemployed after the COVID-19 outbreak, families with or expecting children, micro-businesses, general population who needed help with utility bills, and temporary part-time employment. So far, the authorities have adopted 22 support packages and allocated over 73 billion AMD (137.9 million US$) to those.

 

2.4 Congo

 

April 10. The government has adopted some measures to ease tax and duty payments for private enterprises. In particular, more time has been given to companies to pay their taxes and tax assessments on site have been abandoned.

 

2.5 Cyprus

 

A temporary two-month suspension of payment of VAT without penalties. Applicable to businesses with turnover not exceeding 1 million EUR (based on 2019 VAT returns), and businesses whose turnover has been reduced by more than 25%. Arrangements would be made for the VAT liability to be paid in installments until November 11,2020.

 

2.6 Ecuador

 

March. 12-month deferral in payments of utilities for the months of April, May and June for selected small enterprises with no interests or associated charges. Certain taxpayers such as small companies can defer and pay their taxes in six instalments. This applies for the VAT which is due by April, May and June 2020 as well as for the corporate income tax for fiscal year 2019. According to Presidential announcements, an executive decree will be issued to concede an additional term of 6 months.

 

2.7 Germany

 

Businesses may apply for a deferral of VAT payments until December 31,2020. Businesses need to provide evidence of challenging circumstances due to the corona virus.
Default penalties for taxes not paid waived.

 

2.8 Georgia

 

January 11. Deferral of annual personal income tax and corresponding withholding taxes levied on personal business income for taxpayers that are forced to suspend their business activities due to the Covid-19 pandemic. The tax liabilities can be deferred from April 1 to November 1,2020 upon request.

 

January 11. Deferral of payment of business property tax for taxpayers that are forced to suspend their business activities due to the COVID-19 pandemic, following the same rules as for the tourism sector.

 

Penalty interest shall be accrued during the tax privilege period, even for those taxpayers who enjoy tax privilege, but it will be recalculated and written off after the tax privilege period is over (November 1).

 

2.9 Greece

 

March 11. Suspension of VAT and other tax obligations' payments that were due between March 11 - April 30 until August 31 for businesses, self-employed persons and sole proprietorships affected by the coronavirus crisis based on specific NACE codes.

 

March 11. Suspension of social security contributions (SSCs) payments due by the end-March until October 31 for businesses, self-employed persons and sole proprietorships affected by the coronavirus crisis based on specific NACE codes. Suspended payments will be done in 4 installments of equal amount without interest and surcharges.

 

March 18. A 40% reduction in commercial rent, for March and April, paid by firms affected by the coronavirus crisis based on specific NACE codes.


March 26. 3-month extension of the deadline for the payment of scheduled instalments, due on March 31 and subsequent months, in the context of a debt settlement scheme. These payments will start as of June 1,2020.


2.10 Italy

 

March 2. Suspension of tax payments for individuals and firms resident in the 11 municipalities of the so-called Red Zone (50,000 inhabitants of the area initially hit by the virus and subject to a complete ban of individual movements) in the period February 21 until April 30,2020.

 

April 8. Suspension of VAT, SSC and withheld personal income tax (PIT) payments concerning April and May 2020. The allowance is applied to firms, individual entrepreneurs and self-employed with a revenues level under 50 million EUR if the 2020 March and April revenues decrease is at least the 33% of the 2019 corresponding month revenues. In case of a revenues level over 50 million EUR, the decrease has to be at least the 50% of the 2019 corresponding month.

 

2.11 Iran

 

March 16. Banks will remove restrictions and limits on check payments for businesses. Relief measures covering taxes and insurance for SMEs were already announced by Iran’s central bank.

 

2.12 Kazakhstan

 

Deferral of all taxes and SSC for SMEs and micro-enterprises until June 1,2020.

 

2.13 Kuwait

 

March 31. (i) postpone social security contributions for 6 months for private sector companies;(ii) remove government fees on selected sectors provided that savings are passed on to customers.

 

2.14 Morocco

 

March 16. Businesses with less than 500 employees made temporarily idle and experiencing a reduction in turnover of more than 50 percent can defer social contribution payments until June 30. Their employees who become temporarily unemployed and are registered with the pension fund will receive 2,000 dirhams a month and can put off debt payments until June 30. In April, almost 1 million workers from 134,000 companies were eligible to these transfers. Companies whose turnover for the financial year 2019 are less than 20 million dirhams may, if they wish, benefit from a postponement of the filing of tax declarations until June 30. All tax inspections are suspended.

 

2.15 Myanmar

 

March 18. Monthly business tax payments can be postponed up to the end of September 2020.

 

2.16 New Zealand

 

April 15. Tax payment deferral for businesses affected by COVID-19.

 

2.17 Peru

 

March 13. Deferral of the monthly obligation and declaration (of corporate and personal income tax and VAT) of February, March and April, for SMEs and enterprises with annual sales up to approximately 6 million US$, delayed to June 2020.

 

March 16. Payment of the February 2020 monthly VAT obligation and declaration of February 2020 sales and purchases registry for SMEs delayed to early April 2020.

 

2.18 Senegal

 

April 4. The deferral of the payment of taxes and duties until July 15 for SMEs with a turnover of less than or equal to 100 million XOF, as well as companies operating in the hardest hit sectors (tourism, catering, hotels, transport, education, culture and the press).

 

2.19 Singapore

 

A CIT rebate of 25% of tax payable, capped at $15,000, will be granted for Year of Assessment 2020.

 

2.20 Spain

 

March 12. Deferral of CIT installments until May 30 (6 months, no interest in the first 3 months) for entities with a turnover not exceeding 6 million EUR. The maximum amount of taxes that can be deferred is 30,000 EUR. In order to obtain the deferral, eligible taxpayers need to apply digitally throughout the normal procedure of tax declaration.

 

March 12. Deferral of PIT withholding until May 30 (6 months, no interest in the first 3 months) for individual persons or entities with a turnover not exceeding 6 million EUR. The maximum amount of taxes that can be deferred is 30,000 EUR. In order to obtain the deferral, eligible taxpayers need to apply digitally throughout the normal procedure of tax declaration.

 

March 12. Deferral of VAT payment until May 30 (6 months, no interest in the first 3 months) for individual persons or entities with a turnover not exceeding 6 million EUR. The maximum amount of taxes that can be deferred is 30,000 EUR. In order to obtain the deferral, eligible taxpayers need to apply digitally throughout the normal procedure of tax declaration.

 

March 31. SSC moratorium for 6 months (no interest): for companies (April to June) and for the self-employed (May to July) provided the activity is not suspended.

March 31. Enabling customs procedures across the board. Tax and customs debt deferral for companies with a turnover not exceeding 6 million EUR, for 6 months (no interest for the first 3 months).

 

April 21. Corporate taxpayers with a turnover up to 600,000 EUR may opt to make their CIT installments according to the 2020 current tax base instead of on their previous year`s earnings. This option may be adopted as well by corporate taxpayers with a turnover not exceeding 6 million EUR in their CIT installment payment to be made in October 2020.

 

2.21 Uruguay

 

May 27. The Tax Authorities have deferred the deadlines for filing tax returns and payment of taxes, as a measure to mitigate the economic effects of the COVID-19 pandemic. The deadlines are deferred as follows: Taxpayers included in the medium and small taxpayers' group may submit their CIT, net wealth tax (NWT) and capital duty, advanced payments corresponding to the months of April and May 2020, according to the following schedule, based on their income from sales, services and other gross income taxed by CIT generated in the previous fiscal year, calculated in Indexed Units (IU).

 

Over  Up to Terms and conditions
IU 0 IU 2,000,000 2 monthly,equal and consecutive instalments from the month June 2020
IU 2,000,001 IU 6,000,000 the entire amount in the month of June
 

The value of the IU will be the one in force at the end of the corresponding fiscal year.

 

3. Main features

 

3.1 Many jurisdictions directly cut taxes by reducing corporate income tax, personal income tax and value-added tax rates, etc. or exempt SMEs from certain taxes, so as to minimize the burden of SMEs.

 

3.2 Some jurisdictions have granted additional preferential policies of tax refund and loss carry-forward to SMEs hit hard by the pandemic.

 

3.3 Some jurisdictions take the initiative to adopt preferential policies of rental waiver and tax credits for eligible commercial tenants to help enterprises survive.

 

3.4 Many jurisdictions have generally introduced measures of deferral of tax declaration and tax payments.

 

3.5 In specific sectors severely affected by the pandemic, such as tourism and catering, in which most enterprises are SMEs, some jurisdictions have adopted the policy of paying tax in installments.

 

3.6 Affected by the pandemic, some jurisdictions have implemented measures to suspend tax inspections and mitigate tax penalties in order to reduce the contact between tax authorities and taxpayers, also to alleviate the survival pressure of enterprises.

 

 

  • LOCATION
  • CONTACTS
    OUR LOCATION

    NO. 3(A) Longqing Street, Economic and
    Technological Development Area,
    Beijing, CHINA

    CONTACTS

    BRITACOM Secretariat Office

    Tel:0086-10-63410856

    Email.secretariat@britacom.org

    Web:www.britacom.org