30 March 2020 update on the EU responses to COVID-19 (coronavirus) crisis
The COVID-19 (coronavirus) pandemic is affecting hundreds of thousands of people and is leading, all over the world, to far-reaching health and safety measures. As a result, the COVID-19 crisis has major social and economic consequences. Measures are being adopted to limit the impact on taxpayers as much as possible.
In this EUTA Special edition we provide an overview of the most important measures announced last week by the European Commission, as well as by our home countries Belgium, the Netherlands and Switzerland.
Last week, many EU Member States have notified a variety of aid measures to the European Commission under the Temporary Framework for State aid measures to support the economy in the COVID-19 outbreak. The Temporary Framework provides for various types of aid, such as (i) direct grants, selective tax advantages and advance payments, (ii) state guarantees for loans, and (iii) subsidised public loans, all of which are subject to specific conditions. The Member States which submitted notifications last week include Denmark, France, Germany, Italy, Latvia, Luxembourg, Portugal and the United Kingdom. A large number of the notified measures consist of State guarantees, but also public loans and direct grants have been proposed by certain Member States. The Commission has been able to approve the proposed measures within a very short time frame.
For more information on the Temporary Framework and the various measures that were notified by the EU Member States see here.
Deferral of tax payments
The payment term for the special VAT return (form 629) with respect to the first quarter of 2020 is equally postponed to 20 June 2020 (originally 20 April 2020).
In last week’s addition, we already mentioned that the payment term for corporate income tax, personal income tax (resident and non-resident) and legal entities tax are automatically extended with a period of two months (in addition to the normal payment term) for all taxes assessed as of 12 March 2020. It has now further been clarified that this postponement also applies to the assessment notices that were sent up to and including 27 March and that do not yet mention this additional two month payment term. In such case, the taxpayer may add two months to the payment term mentioned on the assessment notice (resulting in a payment term of four months instead of the usual two months).
In the Brussels region, the Brussels Government has for example announced that it will extend the two-month payment term for immovable property tax and road tax with an additional two-months and that the registration duty for converting mortgage mandates into a mortgage will temporarily not be collected.
Following the federal decisions to prevent the coronavirus, cities and municipalities also provide support measures for the self-employed and entrepreneurs affected. A compilation of a.o. the fiscal measures of the Flemish cities and municipalities can be found on the website of VVSG here. However, it is recommended to have a look at the website of your municipality.
Flexibility on recording a bad debt reserve
Bad debt reserves that are recorded during the financial year and relate to a loss that is not certain but probable, can only be treated tax exempt (i.e. are only tax deductible) if certain conditions are met. This implies a.o. that the debtors to which the loss relates should clearly be individualized. The probability of the loss should moreover appear from special events that took place during the taxable period and are still present at the end of this period. General or fixed bad debt reserves do not comply with these conditions.
A circular letter was issued on 23 March by the Belgian Tax Authorities stating that the coronavirus constitutes a special event that justifies the recording of a bad debt reserve if a debtor does not pay its invoice as a result of the measures taken by the Government. Each debtor should still be assessed separately but flexibility may be applied when assessing the difficulties for recovering outstanding debts from debtors whose turnover has significantly decreased as a result of the restrictive measures imposed by the federal government.
Measures to stimulate the donation of medical supplies
The Belgian Government has asked all Belgian civilians and companies to donate their medical material and supplies to hospitals, in order to cover possible shortages.
In this respect one should know that taxable persons who deducted VAT on the manufacturing or purchase of items donated for free are in principle obliged to adjust the deducted VAT via a self-supply subject to VAT. This additional VAT cost could discourage companies from donating medical supplies.
For this reason, the Belgian VAT authorities have now decided that a donation of medical supplies to hospitals will not lead to a VAT adjustment. This measure will apply until 30 June 2020.
The aforementioned tolerance applies to the following goods:
Medical devices as referred to in Royal Decree 18 March 1999 (e.g. instruments intended for diagnostic and therapeutic purposes, devices intended for clinical research, …)
Protective equipment for healthcare workers and patients (mouth mask, protective clothing, disinfectants, …)
Please note that the measure does not apply to the donation of pharmaceutical drugs.
The medical supplies must be donated to one the following institutions:
- Healthcare institutions as referred to in the coordinated law of 10 July 2008. Pursuant to this law, hospitals must meet certain standards and must be approved / recognized by the FPS Public Health (this concerns in particular those institutions whose medical care services normally fall within the scope of the exemption envisaged by Article 44, § 2, 1°, a) of the VAT Code);
- Associations of hospitals as referred to in Royal Decree 25 July 1997;
- Hospital groups as referred to in Royal Decree 30 January 1989;
- Mergers of hospitals as referred to in Royal Decree 31 May 1989: and
- Locoregional clinical hospital networks as referred to in the law of 28 February 2019.
In order to benefit from this VAT measure, the company should be able to provide proof that the medical supplies were donated free of charge to one of the institutions mentioned above. The proof must consist of a document in which the hospital confirms that the donated medical supplies were used to provide care or were donated to another healthcare institution.
In addition, this document must be drawn up in twofold for each donation, dated and signed by both parties and should contain the following details:
Name, address and VAT number of the benefactor;
Name, address and company number of the beneficiary;
Complete description of the donated goods; and
Amount of goods.
This document replaces the document required by article 3 of Royal Decree n° 1, which establishes that business assets were used for other purposes than the economic activity by the benefactor.
It should also be noted that the following guidelines apply for the aforementioned document:
Multiple donations can be merged by mentioning the different types of medical supplies and their amount. The benefactor can even replace the complete description of the donated goods by attaching the original receipt for the medical supplies to the document.
One summarizing document / overview containing all the donations of one month will also be accepted by the VAT authorities, if the summarizing document is drawn up before the 15th day of the following month and reference is made to the month in which the medical supplies were actually donated.
It is not required to register this document in the accounts of the benefactor, but it should be kept in case of VAT-audit.
Income Tax consequences
If the donator is subject to corporate income taxes (resident and non-residents) or is subject to personal income tax (residents/non-residents) as a self-employed person, the donation will not qualify as an abnormal or benevolent advantage and the costs associated with the donated medical goods will be tax deductible.
Please note that other natural persons subject to personal income tax (resident/non-resident) that wants to provide a donation in kind (i.e. medical devices and products useful in the fight against the coronavirus) to Belgian university hospitals and social welfare hospitals can exceptionally and temporarily receive a tax deduction amounting to 45% of the value of the donated goods (subject to some further limitations) if the donation exceeds a value of EUR 40. The value of the donation should be determined based upon the invoice received when purchasing the goods and should be provided to the hospital that receives the donation. If no such invoice is available, the market value should be determined by the hospital. The hospitals will provide the taxpayer a tax certificate.
For a complete overview of the Belgian measures see here.
Deferral of payment of excises and consumer taxes
The corona crises also gave reason for Dutch Customs to support companies with a special package of measures. One of the announced measures is that a deferral of payment of excises and consumer taxes can be obtained. The company must proof that it suffers from the effects of the corona crisis.
Deferral of payment can be granted upon request of the company involved. This deferral will exceed to exist on the 15th day of the month after the month that the special corona measures have been withdrawn. The request for deferral of payment should be filed once the excise or consumption tax assessment has been imposed.
In order to achieve deferral of payment an email can be sent to the Collector of Customs Amsterdam: email@example.com. The Collector will judge each request of each company involved separately. Additional information can be requested.
For a complete overview of the Dutch measures see here.
Direct tax related measures
On 24 March 2020, the Swiss federal tax administration (SFTA) published a circular letter containing additional clarifications in connection with the tax measures enacted by the Swiss federal council in connection with the effect of the coronavirus. These measures pertain mainly to a suspension of interest for late payment of taxes.
The SFTA clarified that the interest suspension not only applies to individual and corporate income taxes for the 2019 tax period (which become due 31 March 2020) but to federal income tax for any tax period (i.e., tax period 2020 or periods prior to 2019) provided that such tax would become due between 1 March 2020 and 31 December 2020. This applies to both provisional as well as final tax assessments.
Several cantons have followed this approach by temporarily suspending interest for late payment of cantonal taxes. These cantons notably now include Berne, and Geneva. The canton of Zug has announced to check a temporary reduction of the cantonal tax multiplier from 2021 to 2023 to reduce the tax burden. For corporations, the effective tax rate in Zug would be slightly reduced from currently 11.91% to 11.80%.
Swiss state aid: government backed Covid-loans
On 20 March 2020, the Swiss federal council released a fiscal stimulus package for the Swiss economy by establishing government-guarantee Covid-loans (the Covid-Loans). In short, any business impacted by the spread of Covid-19 and/or governmental restrictions with liquidity issues and provided the business has an annual turnover of less than CHF 500m can apply for a special one-time Covid-Loan from any Swiss commercial bank. The loan can range from 10% of the annual turnover to maximum of CHF 20m. The terms are as follows:
Covid-Loan up to (i) 10% of annual turnover or (ii) maximum of CHF 0.5m (Fully-backed Covid-Loan): 100% government backed loan, 0% coupon, application through standardized form and transfer of funds from the bank within 30 to 40 minutes (!).
Covid-Loan up to (i) 10% annual turnover but (ii) exceeding CHF 0.5m (Partially-backed Covid-Loan): 85% government backed, 15% credit risk of the bank, maximum amount CHF 20m (minus CHF 0.5m as Fully-backed Covid-Loan has to be requested), coupon 0.50% and more thorough credit analysis by the bank.
For a complete overview of the Swiss measures see here.