Tax Reduction Measures of VAT/GST in response to COVID-19

updated:2021-01-12    

 
Introduction
 
This paper focuses on the temporary VAT measures in response to the COVID-19 pandemic adopted by BRITACOM jurisdictions that consist of 36 Council Member Tax Administrations and 30 Observers. The aim is to provide suggestions for tax administrations in their consideration of VAT measures to reduce the negative impacts of the pandemic. The information in this paper is mainly selected from the official websites of the OECD, the IBFD and the tax administrations of the BRITACOM jurisdictions.
 
The BRITACOM jurisdictions are implementing emergency tax cuts to support their stuttering economies under the COVID-19 threat. Temporary tax cuts including Value Added Tax (VAT) and Goods and Services Tax (GST) have been introduced to boost consumer confidence as jurisdictions move from the emergency to recovery phase of the pandemic. The immediacy of delivering price cuts for shoppers and state-aid for businesses makes VAT-related policies the most commonly adopted stimulating measure.
 
1.Tax policy 
 
1.1 Germany
 
The German Finance Ministry has issued guidance on the transition for the temporary VAT rate cut from 19% to 16% from July 1 until the end of 2020. The reduced VAT rate is also to be cut from 7% to 5%. Restaurant, café and other catering services will enjoy a VAT rate cut from 7% to 5% between July 1,2020 and June 30,2021.
 
The rate change comes into force on July 1,2020 for all taxable supplies, including intra-community supplies.
 
1.2 Greece
 
March 30. The Government of Greece has introduced a number of tax measures to help businesses cope with the COVID-19 epidemic. These include:(i)A VAT rate cut from the standard 24% rate to 6% on medical products related to the epidemic; (ii)For businesses affected by the outbreak, VAT payments due up to April 30 is postponed until August 31,2020;(iii) Any outstanding VAT at March 11 will not need to be paid until August 31,2020;(iv)The filing of 2019 sales lists has been delayed to June 30,2020.
 
April 7. The Greek tax office is reviewing VAT cuts to assist the tourism sector. This may include in the second half of 2020:(i) cuts to transport and ferry VAT rates from 24% to 13%;(ii) reducing hotel and similar accommodation services to 13%.
 
April 11. VAT payers who do not lay off staff may withhold 25% of their VAT due in April during the COVID-19 crisis.
 
August 14. Greece has confirmed reduced VAT 13% on non-alcoholic beverages and cinema entrance to October 31; and 25% discounted VAT liabilities on June filings.
 
May 13. Greece is reviewing cutting catering services VAT from 13% to 11% furring the COVID-19 crisis. The likely implementation date would be June 1,2020.
 
May 21. VAT rate on public transport, coffee supplies and non-alcoholic drinks will be reduced from 24% to 13% from June 1 and October 31.
 
June 10. VAT is to be cut from 24% to 13% on public transport services from June 1 until October 31,2020. This will include taxis’ ferries and public transport.
 
The right, on application, to offset 25% of VAT paid in the April filing has been allocated to the next payment due in June.
 
June 12. A range of goods (medical, high sugar content drinks, domestic heating and electricity, paper-based books) have been cut to reduced VAT rates of 6% and 13% between June 1 and October 31.
 
June 12. Greek e-books and e-ledgers to start implementation from July 20 ,2020.
 
June 17. Taxpayers who do not take advantage of the 25% VAT discount on liabilities may extend their payment deadlines to September 30. 
 
June 22. The 30% discount on the VAT rate applied in five holiday islands is to be rolled over to 2021.
 
June 23. Taxpayers may apply for 12-month interest free payment plans on their VAT due between March and September 2020. There is also a two-year option with lower interest charges.
 
July 7. VAT advance payments have been reduced for VAT registered businesses by between 30% and 70% dependent on the drop in their revenues in the first half of 2020 compared to the same period in 2019.
 
July 25. Reduced VAT on music books (6%) and sports events admission (13%) until June 30,2021.
 
1.3 Italy
 
April 9. The Council of Ministers liquidity decree has announced delays on VAT returns for April and May may be delayed until June 30. Repayments may be via payment plan of up to 5 months. Small businesses (<50 million EUR turnover) must show a 33% or more decline in revenues since March; Large businesses above this threshold must show a 50% or more decline. Businesses must show a 33% of more decline in revenues in certain regions.  
 
May 15. Italy has abandoned plans to raise VAT to 25% on January 1,2021. VAT payment deadlines for March, April and May for small businesses have been extended to September 16.
 
June 17. Ministers are reported in the media to be considering an Italian VAT rate cuts to support the economy during the COVID-19 crisis.
 
August 10. VAT payers may opt for staged payments on VAT liabilities incurred during the coronavirus crisis. This is instead of the current delay to September 16. The payment schedule is as follows:(i) Four monthly installments of 50% of the liability payable between September and December 2020;(ii) Twenty-four monthly installments for the remainder 50% until December 2022.
 
1.4 Pakistan
 
June 16. Retailers using the point-of-sale cash register reporting process will enjoy a sales tax rate cut from 14% to 12%. The standard rate is 17%.
 
1.5 Saudi Arabia
 
July 1. Saudi VAT rise to 15% comes into effect.
 
The relief is part of a packages for measures to help cope with the coronavirus epidemic. Saudi Arabia has been hit hard economically with the collapse of oil prices in the past month on general recession worries.
 
1.6 Spain
 
March 15. Spain had already announced last week VAT and other tax payment holiday for small businesses who apply for relief for the coronavirus outbreak. The scheme is not available for large businesses (above 6 million EUR turnover) or if the VAT due is above 30 million EUR. 
 
March 12. Spain contemplates a series of measures to make deferrals more flexible for small and medium-sized enterprises(SMEs) and the self-employed. Any applicant must provide details of:
 
The applicant who intends to take advantage of the flexibility established in the Royal Decree Law must pay special attention to the following fields:(i)Type of guarantees offered;(ii)Proposal of repayment terms; number of deadlines;(iii)First instalment date: the date six months from the end date of the ordinary deadline for submitting the self-assessment must be included;(iv)The first 3-months of deferment will be exempted from the normal 3.75% penalty interest.
 
1.7 South Korea
 
April 1. South Korea has introduced a number of VAT easements to help businesses during the economic slowdown. The easements include:(i)Small businesses below 80 million KRW annual turnover will enjoy reduced VAT payments for the rest of 2020;(ii)The threshold for micro businesses to enjoy reduced VAT is being increased from 30 million KRW to 48 million KRW until the end of this year;(iii)Tax filings and payment delays of up to nine months may be provided on application;(iv)A 70% discount on VAT on car purchases from March to the end of June.
 
April 17. Small taxpayer (revenue up to 48 million KRW) are exempted from charging VAT until December 31,2020 on GST.
 
1.8 Ukraine
 
April 30. VAT exemptions are to be provided until the end of 2020 for cultural events. The VAT rate on domestic electricity and utilities will be cut to 10%. Tourism tax will be withdrawn until December 31.
 
2. Tax administration

2.1 Greece
 
April 20. Greek e-invoices and e-books implementation has been delayed until June 2020.
 
May 15. May VAT returns payments deadline has been extended to August 31,2020. There will be no penalties or interest due.
 
May 25. May VAT return payment deadlines are delayed, without charges, until September 30 for qualifying businesses.
 
2.2 Iran
 
Iran has postponed the filing deadline for VAT returns due to the coronavirus pandemic.
 
The National Tax Administration has stated that the new deadline for 2019 quarter 4 returns is April 19,2020. These is also provision on application for filings delays to May 20 by enterprises particularly damaged by the economic situation. In particular, businesses in the tourism, retails, and sports sectors will be considered.
 
2.3 Italy
 
March 17. VAT payments due by March 16 are delayed until March 20 for businesses with a turnover about 2 million EUR per annual. For small businesses below this threshold, payments are postponed until May 31. This applies to resident taxpayers only. All filings are postponed to June 30, including the 2019 Annual VAT return.
 
Specific deadlines for tourism, cultural, transport, catering, sport and similar sectors are being introduced.
 
Until further updates, for non-resident businesses, the 2019 annual return is due by April 30,2020. Quarter 1 VAT return should be submitted by June 1,2020. 
 
Businesses may apply for a five-month payment plan instead.
 
Italy’s Agenzia Entrate had announced last week the suspension of the tax and VAT system in response to the worsening coronavirus situation.
 
The announcement means all non-returns activities, collections, audits and litigation by the office of the Revenue Agency are suspended.
 
April 7. The Italian tax office confirms non-resident VAT payers have not been provided with delays on returns or VAT payments.
 
May 7. Italy has extended VAT returns and Annual returns filing extensions to June 30 to non-established businesses.
 
May 28. Italy is to delay the introduction of pre-completed VAT returns for resident businesses from July 1,2020 to January 1,2021. The annual VAT return 2020 will be pre-completed.
 
June 15. VAT payments may be delayed to September 16 on certain VAT liabilities. Small businesses (less than 50 million EUR turnover) which have had a 33% cut in revenue between March-April compared to same period in 2019. For larger businesses above 50 million EUR turnover, the reduction must be 50% or more. Micro-businesses (less than 2 million EUR turnover), tourism and sports-related sectors given blanket delay.
 
2.4 New Zealand
 
April 15. New Zealand has put forward tax easement measures to help businesses during the COVID-19 outbreak. Whilst there are no plans to extend payment deadlines on GST, penalties and fines for late filings are suspended.
 
Companies may appeal payment fines, but will need to show direct impact of the virus on the company’s situation.
 
May 1. The New Zealand tax office now has the power to change GST reporting periods, filing deadlines, payment deadlines or audits. This may be done on request. The new policy will be in effect until September 30, 2020.
 
2.5 Pakistan
 
April 4. Payment of sales tax return has been delayed again, this time to April 12 instead of March 31.
 
April 23. Sales tax deadlines have been extended further. The Federal Board of Revenue has confirmed returns are due April 30. Payments are now due April 27.
 
May 5.January, February and sales tax returns delayed again to May 15. All payments delayed to May 12.
 
The Pakistani Federal Board of Revenue has moved the filing deadlines for sales tax to assist businesses during the coronavirus pandemic. The January and February 2020 returns are now both due by April 15, 2020. The payment deadlines for the February sales tax return is postponed to March 31 instead of March 15.
 
Taxpayers may also pay sales tax due through internet banking or mobile phones.
 
May 18. Sales Tax filings has been further extended to May 30 from May 15. The payment deadline is May 27.
 
June 26. Sindh Sales Tax returns due on June 18 may be filed by July 2,2020. Any taxes due must be remitted by June 29. 
 
2.6 Peru
 
April 6. Peru has published a number of tax extensions on filings and payments during the COVID-19 crisis.
 
May 7. Delays on electronic sales, purchase and accounting books. The annual report of transactions with other businesses has been moved back to May 29.
 
May 19. Taxpayers may apply for up to 6-month payment plans on their VAT liabilities, must still file March and April returns.
 
VAT reports and remittances for February, March and April have been extended. The issuance of tax penalties for late filings and payments has also been suspended.
 
2.7 Saudi Arabia
 
July 4. There will be accelerated VAT credit repayments to taxpayers.
 
Saudi Arabia has offered VAT payment deferments for businesses for three months. Monthly returns due for February to May will all be delayed to the last days of June to September respectively. Quarterly returns for Quarter 1 are delayed until July 31, 2020. There also reliefs from a range of government charges and customs. The measures were announced on March 20,2020.
 
July 9. The deadline for repayment of VAT by businesses which have been granted payment extensions has been moved to September 30,2020. This is backed with a further suspension of payment collections.
 
July 25. Quarter 1 and Quarter 2 VAT returns should be filed by July 31,2020.
 
2.8 Singapore
 
All GST returns due by April 30 have been postponed until May 11, 2020. The associated payment of GST is delayed by the same period.
 
2.9 Slovakia
 
March 27. The Slovak Ministry of Finance has published proposed relaxation of VAT and other tax rules. This includes a two-month extension of the VAT payment date, currently the 25th of the month following the reporting month or quarter. This will apply for February, March and April payments. There will also be no interest or penalties on late filings. Return filings are also postponed, but just by 30 days. Taxes on employees and the self-employed are to be suspended, too. The legislation and exact new filing dates will be confirmed shortly.
 
June 11. The tax office has confirmed non-resident businesses with a Slovakian VAT registration may apply for VAT deferments like domestic businesses.
 
2.10 Spain
 
April 8. Import VAT and customs duties six-month deferments are now possible for amounts between 100 EUR and 30,000 EUR. There will be no interest charges. Applications must be made via the customs declarations. This is only available to non-large companies, with turnover below 6 million EUR per annum.
 
April 10. Treasury considering extending the already postponed April 20 VAT filing deadline for non-large businesses. These are those earning less than 6 million EUR in sales per annum. The next deadline would be July 20.
 
April 15. VAT registered businesses with a turnover below 600,000 EUR per annum in 2019 can delay filing and payments of their VAT Quarter 1 or monthly submissions until May 20 ,2020. Unlike earlier measures, businesses do not need to apply for this postponement.
 
April 23. The extended VAT return deadline of May 20 has been further extended to May 30,2020. Import VAT and customs may be delayed on application for payments between 100 EUR and 30,000 EUR for non-large taxpayers (below 6 million EUR annual turnover). This facility will be in place until May 30. Any deferred taxes will be interest-free for 3 months, and must be settled by at least 6 months. 
 
May 25. Emergency VAT filing deadline postponement measures are to be withdrawn on June 1 to 4,2020.
 
2.11 United Arab Emirates
 
The United Arab Emirates’ Federal Tax Authority has confirmed that it will permit late VAT payments and filings. Only for businesses experiencing severe coronavirus- related difficulties will enjoy a delay of March 31,2020 returns and VAT remittances be permitted. This new deadline will be May 28. The original deadline was April 28. This will apply for Quarter 1 returns, and monthly filings reporting transactions for March.
 
2.12 Ukraine
 
March 23. Ukraine is to offer a VAT payment holiday until the end of May 2020. No late payment interest will be due for liabilities deferred. However, returns must still be filed. These are generally due by the 20th of the month following the reporting month. A range of medicines and hospital supplies will be exempted from import VAT.
 
2.13 Uruguay
 
March 25. The General Directorate of Tax in Uruguay has extended this month’s VAT filing deadline until March 27 for companies. The payment date has also been extended by one month for February and March VAT liabilities. Taxpayers may also apply for a phased repayment plan.
 
May 27. The General Directorate has announced a six-month payment option on April VAT liabilities. Larger tax payers may switch to monthly VAT payments.
 
June 12. The next round of businesses mandated to start issuing electronic invoices have been given a registration delay until December 1,2020. The original deadline was August 1.
 
June 23. May VAT payments have been delayed to June.
 
3. Key features of VAT measures:
 
3.1 Many jurisdictions have directly introduced  temporary VAT rate cut to help businesses during the economic slowdown.
 
3.2 Some jurisdictions have deferred deadline of VAT returns and fillings. This is to help businesses cope with the disruption created by the coronavirus epidemic.
 
3.3 Some jurisdictions permit late VAT payments without interest or penalties. Taxpayers may also apply for a phased repayment plan, including a certain period extension of the VAT payment date.
 
3.4 Interest charges on businesses loans to small enterprises will be exempted.
 
3.5 Affected by the pandemic, some jurisdictions have implemented measures to suspend tax inspections and mitigate tax penalties in order to alleviate the survival pressure of enterprises.
 
 
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