VAT measures during COVID-19

How tax authorities are responding to the global pandemic

What you need to know

Here we will share the information we’ve gathered from tax authorities around the world with regards to their response to COVID-19.

This information is subject to change as the situation develops daily. We’ll keep this page updated as regularly as possible. Last updated: 21/04/2020

VAT on medical supplies in the EU

To understand the specific measures put in place to reduce the cost of medical equipment, please read our update on Import VAT on medical supplies in the EU.

Deferments, extensions, tax relief packages and everything else

To learn more about the common strategies put in place by governments across the globe please read our Practical Guide to VAT relief during the COVID-19 Pandemic

To apply for a deferment

As mentioned in the guide above, some tax authorities are electing to offer the opportunity of deferring VAT payments to businesses struggling with the additional strain presented by COVID-19. To access these VAT relief measures, it’s very likely you’ll need to put together an application. This is because many tax authorities will be assessing businesses on a case by case basis to establish the level of disruption caused by the pandemic.

What you might need

Whilst concrete guidelines have not been published yet, we’ve put together some examples of information we believe you may need to submit as part of a deferment application. This is informed by our communications with the tax authorities but, as of yet, is an example only. This will be subject to change should official guidelines be published.

An Application Letter

In order for the tax authorities to assess the effects of COVID-19 on your business, you may be required to submit a signed application letter explaining why you need a VAT deferment. This might need to include the following:

  • The current status of your VAT account.

Summarise how much VAT you currently owe to the tax authorities.

  • How long you think you may need to defer your VAT payments for.

Which of your future VAT payments may be affected by COVID-19?

  • When you think you will be able to pay the balance due and any future payments.

It’s always best to show the tax authorities that you are willing to pay your taxes. As these deferments have been put in place as a supportive measure for those in need, and are not an indefinite postponement, the tax authorities will want to know how and when you intend to address your debt owed.  

  • Confirmation that you intend to continue fulfilling your VAT reporting requirements.

Deferments apply to the payment owed but not the filings themselves. In most cases, filing requirements will continue as normal.

  • A brief explanation of the actions you’ve taken because of COVID-19 and how these have financially impacted your business.

This could be any number of things, such as having employees work from home, reducing employee hours, deferring payments to vendors, etc. It is important to show the tax office that you are taking the steps necessary to confront this head on, but that the crisis is so adversely affecting your firm that additional relief is necessary. We do not believe that tax offices will accept applications from firms whose first attempt to confront financial hardship is to defer indirect tax payments.

  • Evidence of the hardship your business has faced and a brief explanation of it

This could include bank statements showing cash on hand, sales data showing decreased sales volume, invoices for increased expenses, payroll statements showing your payroll obligations to your employees, and anything else that you deem relevant.

Translations

You may also be required to submit a translated version of this application letter depending on the tax authority you wish to seek deferment from. This is something we can help with once you’ve completed the original.

It’s all new

These processes have been put in place to support business going through difficult times. But they are new processes, as such will be subject to change and variances. We cannot guarantee that submitting all of the above will make your application successful and only you can decide if the process is warranted for your business.

It’s also worth noting that most of these measures have been put in place with an emphasis on supporting domestic businesses, not distance sellers. As such, it may be less likely that your application will be accepted as a foreign business.

How would I apply?

Despite reduced operating hours or reduced postal operations across the EU, applications should be made in writing. We believe the application should be posted directly by you to the relevant tax authority (we can provide you the relevant address). However, we strongly advise that you also send us a scanned copy of the application, including all evidence, so that we can also forward it to the relevant tax authority electronically. This will allow us to let the tax authority know that a paper application from you is on the way.

Next Steps

If you want to apply for a VAT deferment, please contact you Client Manager and include the suggested application letter, evidence and relevant documentation listed above. They will review your application and discuss with you what will need to be done next.

Individual Responses

The following is a breakdown of the new measures put in place by specific tax authorities:

Austria Extensions for the monthly VAT returns normally due in Austria can be granted by the tax office upon individual request.
Belgium The Belgian tax office has extended the VAT return and payment deadlines. They are also giving businesses facing financial difficulties the opportunity to apply for further extension should that be needed.
Finland The Finish tax office does not seem to consider that the COVID-19 is a reason to leave taxes unpaid. However, from 25 March 2020 businesses with financial difficulties can request a payment arrangement with eased terms. Additionally, the tax administration is preparing a legislative amendment to temporarily lower late-payment rates for taxes in a payment arrangement.
France At the moment, there is no extension for the VAT returns or payments available in France. The French Government does not consider that VAT – as an indirect tax paid by the consumers – has an impact on businesses.
Germany Applications to defer VAT payments can be submitted to the German tax authorities. However, payment extensions will be granted by the tax office only if they approve the request.
Ireland The Irish tax office has taken measures to assist taxpayers facing difficulties due to the COVID-19 pandemic. Businesses experiencing cash flow issues should continue to submit their tax returns on time. However, the application of interests on late tax payments has been suspended as well as debt enforcement until further notice. Additionally, businesses other than small and medium sized companies are encouraged to get in contact with the tax office if they are experiencing cash flow difficulties.
Netherlands The Dutch Tax Authority is giving taxpayers the opportunity to apply for a payment extension for all taxes, including VAT. No fines of late payment penalties will apply and the normal collection interest rate for payment after the deadline has been decreased to nearly 0%.
Spain The Spanish tax offices are all closed and as it stands Q1 2020 VAT returns are still due within the usual deadline (20 April 2020). Payment extensions can be granted for small businesses upon application and approval from the tax office.

Update 21/04/2020: Please note that the Spanish Government has approved an extension for the filing and payment of the Q1 2020 VAT return. ECSL are also covered by this extension. This extension is available for businesses with a 2019 taxable turnover in Spain lower than 600,000€. The new deadline for Q1 2020 is now 20 May 2020.
UK Please note that all VAT payments due in the UK between 20 March and 30 June 2020 are being deferred to the end of the year. However, VAT returns are still due within the usual deadlines. HMRC has indicated that if you are able to pay your VAT as normal, you can of course make your VAT payment.

Update 21/04/2020: If you decide to defer your VAT payment, you do not need to contact HMRC. VAT payments are automatically being deferred between 20 March 2020 and 30 June 2020. The VAT due during this period will have to be paid instead on or before 31 March 2021. If you normally pay your VAT by Direct Debit you should contact your bank to cancel your Direct Debit as soon as you can, or you can cancel online if you are registered for online banking. As it stands, VAT payments due after the end of the deferment period (after 30 June 2020) will be due as normal. Further information about how to repay the VAT you have deferred will be released from HMRC soon and we are keeping an eye on this.

If you have any questions about the new VAT measures or would like to discuss your situation further, please get in touch with the team today or contact your Client Manager directly.

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