International Tax Changes During the COVID-19 Pandemic

Charles Maniace
March 19, 2020

In the last several weeks, we have monitored many efforts by federal, state and local governments to provide relief to both businesses and individual taxpayers impacted by the COVID-19 pandemic.

As they relate to indirect tax (VAT/Sales Tax/GST), the measures enacted to-date have followed varying paths. Here are a few examples of the types of changes that are currently taking place to help ease the burden on taxpayers during these turbulent times.

  1. Standard Indirect Rate Reductions – For example, effective April 1 and extending through May 31, 2020 the country of Cyprus will decrease their standard VAT rate and their reduced rate by 2%. A similar proposal is being discussed in Jamaica.
  2. Temporary Tax Holidays – The Commonwealth of Puerto Rico announced a “Tax Holiday” commencing on March 23 and ending on April 30. During this time, their indirect tax (IVU) will not apply on certain necessities such as hand sanitizers, soap, shampoo, tissues, masks, isopropyl alcohol, disinfectants, antiseptics, household cleaning products, gloves, pain relievers and antihistamines.
  3. Automatic Extensions of Filing Deadlines and Licenses set to Expire – In Denmark, filing deadlines have been extended by 30 days for March, April and May.  In Kansas, given that the Alcoholic Beverage Commission is closing, all active alcoholic beverage licenses set to expire between March 19 and April 30 will receive an automatic 30-day extension
  4. Permissive Postponement of Tax Collection and Enforcement Activities – This seems to be the most common form of relief being offered in indirect tax. Generally, they involve actions such as extensions of filing and payment deadlines, granting requests for penalty abatement for late filings and payments, allowing tax remittance pursuant to a payment plan, and an agreed suspension of audit activities, being permissively granted on a case by case basis when the taxpayer can demonstrate a COVID-19 related challenge.

The benefit of indirect-tax related relief for individual taxpayers experiencing personal economic strife can be debated. While temporary rate reductions and tax holidays have some considerable political appeal, there are those that would argue that direct relief in the form of direct payments/subsidies to individual citizens (for example as is currently being contemplated by the US federal government) is a far more efficient means of providing relief.

For businesses, these temporary tax measures can represent a substantial hardship. In this time of crisis, are companies particularly vigilant about monitoring and tracking indirect tax rate and rule changes? Will they have the resources available to clearly account for the subtle nuances involved in a sales tax holiday? In the best of times, these types of changes can strain available resources, never mind right now.

Conversely, the benefit of deferred compliance obligations for businesses can be substantial and immediate, especially for companies relying on manual processes and procedures that cannot be executed nearly as efficiently with a remote, distracted or absent workforce. However, when such relief is only granted upon request, the question remains will organizations know such options exist and apply for relief and will there be governmental employees on hand to grant said relief in a timely manner.

Many economists argue that the best tax systems are those that operate entirely behind the scenes, have minimal impact of economic activity, and allow for automated compliance. The gold standard is those countries that have adopted continuous transaction controls that rely heavily on automation and computing power to effectuate compliance. The best companies have scalable and comprehensive automated systems in place, allowing them to effectively control tax compliance out if a single center of excellence as opposed to exposing themselves to multiple points of failure.

Sign up for Email Updates

Stay up to date with the latest tax and compliance updates that may impact your business.

Author

Charles Maniace

Charles Maniace is Vice President – Regulatory Analysis & Design at Sovos. An attorney by trade, Chuck leads a team of attorneys responsible for all the tax and regulatory content that keeps Sovos clients continually compliant. Over his 14 year career in tax and regulatory automation, he has given talks and presentations on a variety of topics including The Taxation of High Tech Transactions, The Taxation of Remote Commerce, The Regulatory Implications of Brexit, The Rise of E-Audits, Form 1042-S Best Practices and Penalty Abatement Practices for Information Returns. Chuck is a member of the Massachusetts Bar and holds a B.S. in Business Economics from Bentley College, a J.D. from Boston University School of Law, and an LL.M in Taxation from Boston University School of Law.
Share This Post

LATAM VAT & Fiscal Reporting
May 20, 2020
Sovos Acquires Taxweb, Extends Tax Determination Capabilities in World’s Most Challenging Compliance Landscape

Earlier this month Sovos announced its second acquisition of 2020, completing our solution for Brazil with an unparalleled offering that solves tax compliance in the place where it is most challenging to do so.  Too many companies doing business in Brazil have been burdened by managing multiple point solutions for continuous transaction controls (CTCs), tax […]

ShipCompliant United States
June 3, 2020
4 Steps to Get Started Shipping DtC

Direct-to-consumer (DtC) shipping of beverage alcohol products is a $3 billion market that continues to grow annually. DtC shipping can be a great way to grow your business by reaching new audiences, expanding your customer base, and increasing your sales. But, before you can take advantage of this growing market, there are some steps your […]

E-Invoicing Compliance LATAM Tax Compliance VAT & Fiscal Reporting
June 3, 2020
Latin America: An Update on E-Invoice Requirements

In the field of global e-invoicing and tax control, most eyes have been focused on trailblazing initiatives in Asia, as countries such as India, Vietnam and Thailand look set to introduce new reforms in this area. However, even in the home of mandatory digital tax controls – Latin America – where mandatory clearance of B2B […]

EMEA IPT Italy Tax Compliance
June 3, 2020
Italian Parafiscal Complexities

Premium tax and parafiscal compliance for insurers authorised to operate under the Italian regime can be challenging. For the experienced, it may seem that each year brings a different obligation to be met with new requirements often being introduced. There are almost always links between an upcoming year’s reporting requirements and declarations made in previous […]

Tax Compliance Tax Information Reporting United States
June 1, 2020
The Advantage of a Cloud-First Company

With the acquisition of Eagle Technology Management (ETM) and Booke Seminars, Sovos has united the very best in statutory reporting solutions, technology and expertise. Below is an overview of our strategy following these acquisitions: Sovos’s SaaS and Security Strategy  Sovos at its core is a Software as a Service (SaaS) and cloud-first company. This means […]

ShipCompliant United States
May 28, 2020
Ask Alex: Your Bev Alc Compliance Questions Answered (May 2020)

Do you have questions about the rules, regulations, and compliance requirements of the beverage alcohol industry? This series, Ask Alex, is a perfect opportunity to get those pressing questions answered straight from one of the industry’s regulation and market experts, Alex Koral, Senior Regulation Counsel, Sovos ShipCompliant.  To take advantage of this opportunity and get […]