In recent months, a virus COVID-19 has broken out in many countries on the globe, which caused huge losses to countries and enterprises. As many firms declared difficulties in their cash flows, some upcoming tax burdens also become an issue in need of a provisional solution allowing firms to survive this unprecedented period. The OECD has quickly published a set of guidance to tax authorities last month to help with establishing provisional measures countering negative impacts brought by the COVID-19. This guidance is meant to assist countries dealing with this sudden outbreak, providing supports to the public, increasing liquidity of firms and thus maintaining productivity of each economy as much as possible.
The guidance can be summarised into the following key recommendations:
- Authorities should provide temporary relief or subsidies to individuals and labourers domestically, including groups which are not eligible to receive such benefits in normal conditions due to the special circumstance of COVID-19.
- Provide exemptions or deferrals of taxation on social securities and income tax on enterprises and sole proprietorships.
- Provide tax benefits to medical personnel and staff working closely with virus preventions, for instance, exempting partial income tax and social security contributions.
- Apply deferral schedules on levying import VAT, customs duty, consumption tax and the like while safeguarding and enhancing the management of such schedules to avoid any abuse.
- Expedite tax returns on VAT, target on prevention of tax fraud, and simplify procedures on application for VAT exemptions on bad debt.
- Adjust expected tax estimates on taxpayers to reflect taxpayer obligations more accurately and adjust the prepayment of such taxes accordingly.
- Grant deferrals or exemptions to taxes of which the tax bases are not changing according to economic cycles.
- Enact generous rules on carry-over losses.
- Allow employers to pay workers with partial employment subsidies or other substitutive incomes to ease the pressure of staff trimming.
- Countries should stay prepared for post-pandemic economic recovery, in particular maintaining a balance between fiscal incentives and stabilizing measures.
OECD further pointed out that the focus of taxation management policy has shifted to implementing more traditional tax incentives, the purpose is to restore market faith and encourage economic activities. The current economic hibernation could effectually help everyone and every country to survive such a down-turn caused by the outbreak of COVID-19. Recovery in economy can be expected but it could take some time. In post-pandemic recovery, a balance between incentives and stability is actively sought with discretion in each country. If you would like to know more about OECD obligations on enterprises or wish to see some relief benefits on your company, talk to us!
Global Connect Admin B.V. | Xuan Hao