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Virus Tax Relief Takes Precedence Over State Aid Rules: EU (1)

March 13, 2020, 7:15 PMUpdated: March 13, 2020, 9:00 PM

The EU will allow member countries to temporarily suspend taxes on businesses, including corporate tax, in response to the coronavirus pandemic, the bloc’s competition chief said Friday.

“They can give all businesses, throughout the economy, a breathing space to help them cope—providing wage subsidies, or suspending corporate tax payments or payments of VAT,” Margrethe Vestager, executive vice-president, said in a statement.

Under normal circumstances, such measures would be considered illegal state aid, forbidden by EU rules. But the disruption caused by the Covid-19 outbreak has prompted the European Commission to take a lenient view.

Countries across the European Union have started to offer tax relief as part of broader efforts to lessen the economic impact of the new coronavirus.

Italy

Italy is preparing to postpone tax payment deadlines and suspend corporate tax obligations.

It wasn’t immediately clear what the measures would consist of, but the Ministry of Economy and Finance said Friday they would include postponement of a value-added tax payment deadline originally scheduled for March 16.

The new rules will be part of a 25 billion euro ($26.7 billion) economic aid package the Council of Ministers is expected to approve soon.

The Italian Revenue Agency announced Thursday that it would be suspending most tax audits, verifications, inspections, collections, and disputes.

Germany

The German government said Friday it will give businesses affected by the virus relief from filing deadlines and tax prepayment requirements.

The tax provisions are part of an expansive plan by Finance Minister Olaf Scholz and Economy Minister Peter Altmaier to provide businesses with liquidity to secure growth and employment.

Tax authorities can grant deferrals more easily and have been instructed not to impose any strict requirements and to postpone the timing of a tax payment if its collection could hurt the company, according to the plan.

The lowering of tax prepayments is also simplified. The plan states that “as soon as it becomes clear that taxpayers’ income is likely to be lower in the current year, the tax pre-payments” should be reduced quickly.

Enforcement measures and late-payment penalties will be waived until Dec. 31 for companies directly affected by the coronavirus.

France

France is offering tax relief to “companies of all sizes” hit economically by the contagion, including possible tax breaks.

Companies in France will be able to delay tax and social welfare payments and, in the most difficult cases, get breaks on their direct taxes, President Emmanuel Macron said in a televised speech Thursday night. France’s tax and social security administrations on Friday announced details about how companies, as well as merchants and independent workers, could request relief.

“All companies that want to do it can delay—without justification, without formality, without penalty—the payment of contributions or taxes due in March,” Macron said, adding, “We will next work on the necessary measures to cancel or re-schedule, though we know, collectively, that it always takes too long to do that. I want simple measures for our economic forces.”

Macron’s press office didn’t immediately respond to requests for further comment.

Companies looking for more than just delayed payments would need to be “able to demonstrate that they’re suffering from the situation,” Jessie Gaston, a partner at Dentons in Paris, said. “I think large multinationals will be able to delay their payments, but in most situations, they’re not going to be the target for exemptions of taxes,” she said.

Tax practitioners are waiting for the government to post an official commentary note that sets out further details of the relief, Gaston said.

Romania

Romania will extend deadlines for paying building, land, and vehicle taxes. The deadline for payments will be extended from March 31 to June 30, and applies to the first of two installments of each tax, the Romanian Ministry of Public Finance announced Friday.

The changes will be enacted by an emergency government decree and are intended to support taxpayers as Covid-19 continues to spread, the government said.

All three taxes are typically paid annually in two equal parts by March 31 and Sept. 30, according to accounting firm Accace.

For buildings owned by companies, the tax rate is between 0.08% and 0.2% of a residential building’s tax value and between 0.2% and 1.3% of a non-residential building’s tax value.

(Updates with Italy, Germany, and Romania information.)

To contact the reporters on this story: Rick Mitchell in Paris at correspondents@bloomberglaw.com; Janna Brancolini in Milan at correspondents@bloomberglaw.com; Barbara Tasch in Zurich at correspondents@bloomberglaw.com; Jan Stojaspal in Prague at jstojaspal@correspondent.bloomberglaw.com; and Hamza Ali in London at hali@bloombergtax.com

To contact the editors responsible for this story: Meg Shreve at mshreve@bloombergtax.com; Sony Kassam at skassam1@bloombergtax.com; Kathy Larsen at klarsen@bloombergtax.com

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