This paper focuses on the preferential tax measures adopted by BRITACOM jurisdictions that consist of 36 Council Members and 28 Observers. The aim is to provide suggestions on waiver of tax penalties and postponing tax audits. The information in this paper is mainly selected from websites of OECD, KPMG and the tax administrations of the BRITACOM jurisdictions.
As a result of the economic downturns, the BRITACOM jurisdictions have come up with tax relief measures to make the situation more manageable by the taxpayers. Considering that COVID-19 social distancing measures have prevented taxpayers from accessing information they need to fulfill tax obligations, many tax authorities announced that taxpayers who were unable to submit returns or pay tax due to the lockdown would not be charged any penalty or interest for late submission or payment. With most tax administrations giving priority to taxpayers’ assistance and service, tax audits and inspections have been put on hold.
1. Waiver of tax penalties and postponing tax audits
June 30. The General Taxation Department published on its website a press release on new tax measures to support businesses. As part of the tax-related measures adopted by the public authorities in support of economic operators that are financially impacted by the current health crisis, fines, increases and penalties charged for late filing of declarations and payment of related duties, taxes and fees were cancelled. It is also envisaged that late payment penalties related to tax rolls for which the date of collection occurred after March 22, 2020 will be cancelled.
April 9. Except for occasional situations, all external inspections and external auditing are suspended.
April 21. According to recent reports, Armenia has reduced the late payment interest rate from 0.075% to 0.04% for SMEs impacted by the COVID-19 pandemic. The reduction is effective from April 21, 2020.
In addition to the late payment interest rate, the Central Bank of Armenia decided on April 28, 2020 to reduce the key refinancing interest rate from 5.25% to 5.0%. This follows a cut in the rate from 5.50% to 5.25% on March 17, 2020. For taxpayers, the rate affects the amount of deductible interest on loans provided by entities other than banking and financial institutions, which is limited to the extent the interest rate exceeds twice the key rate of the Central Bank.
July 27. The government, however, has not suspended tax inspections, and these will still be conducted to determine compliance with the tax measures. A new joint annual inspection is also being launched so that tax inspectors from the provinces and certain designated ministries are to be involved at the same time.
May 13. Ministry of Finance reportedly issued a Circular on May 13, 2020 for the implementation of relief measures announced in April in response to COVID-19. The measures include: The suspension of tax audits from April 1 to June 30, 2020, except for desk audits, audits involving fraud, and certain other cases. Further to the above, Cameroon is also reportedly providing a suspension/deferral of social security contribution payments for the months of April, May, and June 2020, subject to request, and providing penalty relief.
April 15. On April 15, 2020, the Minister of Budget issued a Circular Note No. 0247/MFB-CAB with measures aimed at alleviating the economic impact of the COVID-19 pandemic, including: the suspension of penalties, fines and interest for late payments for a period of two months; the suspension of customs and other tax audits for three months from April 1, 2020 to June 30, 2020.
1.7 Cote d’Ivoire
March 30. On March 30, the Government announced the following tax relief measures to address the impact of COVID-19 pandemic on taxpayers: (i) the suspension of tax audits procedures for a three-month period; (ii) penalty waiver for delays in the execution of public contracts and orders with the State and its branches during the crisis period.
March 31. All field audits have been suspended. Desk audits continue on open cases.
May 11. Deferral of the tax return payment due date with no penalty.
April 24. According to recent reports, the Ethiopian government issued regulations for additional COVID-19 relief measures on April 24, 2020. The measures include an extension of monthly VAT returns and payment for the months of March, April, and May 2020 to June 2020, without any penalty or interest.
May 2. Interest payment and penalties on outstanding taxes due between 2015 and 2018 will be canceled outright and the underlying tax due can be paid in installments, the Ethiopian Broadcasting Corporation reported, citing Eyob Tekalign, the State Minister of Finance. Firms affected by the COVID-19 will also get relief for four-month of income tax.
April 9. All tax administrative procedures, including audits, have been suspended until the end of the mobility restrictions put in place by the government.
July 22. Enforcement measures (e.g., direct debit into bank accounts) and late-payment penalties will be waived until December 31, 2020 if the debtor of a pending tax payment is directly affected by COVID-19. Late payment-penalties from the period from March 19, 2020 to December 31, 2020 will be waived, older fees will be suspended until December 31, 2020.
The state will give the tax authorities more leeway in deferring tax debts: Deferrals or reductions of payable income, corporate and trade taxes may be granted if companies prove to be directly affected by the corona-crisis and regular tax collection would pose a substantial severity. Taxpayers may submit applications until December 31, 2020 for deferral of taxes already due or becoming due by that date.
Taxpayers affected by COVID-19 may defer tax payments for declared income and property taxes until the November 1, 2020. With respect to taxpayers that have asked for the extension of the payment deadline, the penalty interest will be accrued but it will be recalculated and written off after the end of the deferral period (November 1, 2020).
Interest is not calculated with respect to the extension of payment deadlines and the suspension of tax debt collection.
June 9. According to a June 2, 2020 statement by the State Secretary, the tax authority will not levy penalties on taxpayers that are not capable of meeting the new reporting requirements until September 30, 2020. In any event, taxpayers that previously were not required to provide such data need to register with the tax authority's official online reporting system before the issuance of the first invoice (that is, before July 1, 2020) in order to be eligible for the penalty relief.
The grace period and delayed effective date are being provided as relief measures in response to COVID-19 pandemic. Relief from penalties only applies to new requirements effective from July 1. In instances of non-compliance regarding invoices above the 100,000 HUF threshold, the tax authority may still impose penalties.
April 3. Audits of large taxpayers designated for comprehensive audits in 2020 will be rescheduled in light of the current situation. Cases, where the tax administration has already informed businesses of audits planned, are under review. They will be rescheduled on request or ex officio. Similar plans exist for SMEs and individuals.
For businesses it is a legal requirement to be able to communicate with the tax administration electronically, even in audit scenarios. Where an audit is necessary it will be conducted preferably without personal contact. Local audits with personal contact will only be carried out in severe cases where fraud is expected.
March 26. For all taxpayers the tax fulfillments are due, without penalties, by June 30. The deferral payments are due, without interests or penalties, to be paid either by May 31 in one payment or in no more than 5 monthly installments of the same amounts starting from May 31.
Audits and all assessment activities are suspended except for those whose terms of expiration fall within the suspension period. In particular the terms for audit, processing of tax return, assessment, collection, are suspended ended until May 31.
April 17. The due date for requesting reduction or elimination in administrative sanctions, tax overpayments return, cancellation of incorrect tax assessments, and cancellation of inspection results will be extended for a maximum of 6 months.
May 11. The penalty accrual on unfulfilled tax obligations to be ceased until August 15, 2020.
April 3. Suspension of tax charges as at March 31 and of payroll charges for all sectors, except those not suffering from the crisis.
Tax inspection and third-party notification suspended until June 30.
1.20 New Zealand
March 30. Businesses that are impacted by COVID-19 can apply for the interest charged on underpaid tax to be remitted by Inland Revenue (IR). This is a new measure in response to COVID-19, as the pre-existing law would not have recognized COVID-19 as an “emergency event” (which allows IR to remit the interest).
IR is not proactively opening any new audit cases (this decision will be reviewed in June 2020). Existing audits will generally be delayed for three months unless the customer does not want to delay the case. It may be appropriate to continue with an audit or open a new case where there is perceived heightened risk to the integrity of the tax system and delay would have a significant impact on voluntary compliance.
June 3. Tax audits were put on hold in response to COVID-19 pandemic. The audit actions are to resume in two phases—reconciliation of tax findings arising from desk reviews, monitoring visits; and tax and investigations are to resume immediately. Field audits will begin at the end of June 2020.
The tax authority in April 2020 announced the waiver of interest and penalties on outstanding tax liabilities and debts arising from desk reviews, tax audits, and investigations as a relief measure in response to COVID-19 pandemic. To be eligible for the interest and penalty relief, taxpayers were to have settled their outstanding tax debts in full by May 31, 2020. With the June 2020 announcement, that deadline has been extended to June 30, 2020.
June 19. The Federal Inland Revenue Service (FIRS) provided a one-month extension of the due date for companies to file their companies income tax returns, and companies with a December 31 year-end now have until July 31, 2020 to submit their returns and pay their tax liabilities for 2020. No interest or penalties will be imposed for timely filed returns and payments of tax.
July 20. The tax authority of Bayelsa state announced an extension of the deadline for taxpayers filing Form A returns to September 30, 2020; waiver of interest and penalties for “pay-as-you-earn” (PAYE) remittances to August 31, 2020. The tax authority of Kebbi state in July 2020 announced a suspension of implementation of new tax rates, penalties, and levies for one year.
August 4. The tax authority of the Nigerian state of Delta State announced that it would waive interest and penalties on outstanding tax liabilities arising from tax audits of “affected taxpayers” (including education institutions, eateries, and hotels) for the period from 2011 to 2019. The waiver is provided as a relief measure in response to COVID-19 pandemic. Affected taxpayers that want to request a waiver of interest and penalties on tax liabilities arising from audits must submit an application within 21 days of the assessment notice, and then settle the outstanding tax liabilities by September 30, 2020.
March 27. The Peruvian tax administration announced a limited-time waiver of penalties, which would otherwise apply, during the national state of emergency.
March 20. Suspension of Tax Audit: Effective March 18, post - clearance and comprehensive tax audits have been put on hold for a period of 30 days, exception is made to desk audits which remain as planned.
Suspension of tax audits—effective March 18, 2020, tax audits (other than “desk audits”) generally have been put on hold for a period of 30 days.
March 23. General extensions available for companies to obtain tax filing and payment deadline extensions for up to 9 months in exceptional circumstances and for up to 1 month if there is a delay to the completion of the statutory audit. General extension requests must be made by application and are considered on a case-by-case basis.
April 8. The initiation of tax evasion investigations is only done on cases that are about to run out on their statute of limitation. Even in those investigative cases, mainly non-contact forms of communication are used. For cases in designated disaster zones, a hold is put on all initiation of new cases until further notice and a 2-week hold is put for on-going cases.
1.25 Saudi Arabia
September 14. The General Authority for Zakat and Tax (GAZT) extended the waiver of penalties for all tax filings and payments until September 30, 2020 in an effort to mitigate the impact of COVID-19 pandemic on the economic activities of businesses. This extension applies for the waiver of penalties for income tax, withholding tax, value added tax, and excise tax, which originally ran from March 18, 2020 until June 30, 2020.
April 2. During the state of emergency, an interest rate is calculated and charged, but it is decreased by 10% and is equal to the annual reference rate of the National Bank of Serbia, which currently amounts to 1,75%.
When it comes to paying tax on wages, social contributions and corporate profit tax, there will not be any interest calculated since all such payments are deferred.
April 8. Late payment penalties and interest will not be imposed on companies and self-employed persons, who are granted an automatic 3-month deferment of income tax payments. For other taxpayers, against whom enforcement action such as late filing or late payment penalties/interests is taken, various channels such as the e-services are available to allow taxpayers to apply for a waiver of the penalties/interests.
May 11. The failure to meet deadlines during the pandemic period will be forgiven under the condition that the respective action will be made by the taxpayer by the end of the month following the end of the pandemic period at the latest. The forgiveness of missing deadlines does not cover the submission of tax returns, EU Sales List, VAT Ledger Statements (VAT reports) and payment of individual taxes and tax prepayments.
March 15. Where SMEs and self-employed individuals ask for a deferral (for further information see section “Deferral of payments”), no interests will be charged during the first three months.
Audit related activity, such as meetings at the taxpayer’s or tax administration’s premises will resume on April 30, 2020. However, investigations will continue to be carried out remotely.
1.30 United Arab Emirates
March 22. Dubai Customs have also put audits on hold.
March 17. On March 17, legislation was passed enabling businesses to adopt more flexible working hours. No penalties will be applied to tax law violations that are committed between March 1 and May 31, 2020, although this exemption will not apply to VAT or excise tax and rent. The deadline for filing annual income declarations has been extended for two months until July 1, 2020, with tax payable by October 1, 2020. In addition, the parliament has suspended the requirement to pay tax on commercial real estate and land; defined COVID-19 quarantine as a force-majeure for legal contracts; postponed the requirement to use registrars for settlement transactions; suspended tax inspections of companies; expanded the government program of affordable bank loans at discounted interest rates for businesses; and suspended interest payments for taxpayers and social security contributors.
April 16. From March 18 to May 31, 2020, there is a moratorium on documentary and actual audits, except for audits on the accuracy of the calculation of budgetary VAT refund. The moratorium also does not cover actual audits on legal violations in the area of circulation of excisable goods and excise taxation. Documentary audits on unified social contribution are suspended for the period from March 18 to May 18, 2020.
Based on the results of audits completed before March 18, 2020, the controlling authority draws up audits reports and sends (delivers) tax assessment notices to the taxpayers in accordance with the procedure and within the time-frame.
2. Features and conclusions
2.1 Tax administrations typically apply penalties for late filing of tax returns or for late payments of tax, on the latter of which interest may accrue. Such penalties or interest payments can both cause cash-flow problems and increase burdens at such a hard time where a global pandemic was front and center. It is quite common for tax administrations of the BRITACOM jurisdictions to take tax relief measures such as remitting penalties and interest in an effort to help taxpayers go through the hardships.
2.2 A tax audit is usually a highly resource-intensive process, and may also pose transmission risks for both tax officials and taxpayers. Consideration could be given to a temporary change in auditing policy, particularly for taxpayers for whom audits involve a proportionately greater diversion of resources and time. This may be done through adoption of a blanket policy or through changes in risk parameters. Due to the epidemic, most BRITACOM jurisdictions have suspended audits currently in progress that require physical presence of the auditors. Audits of tax fraud cases, nonetheless, are not to be waived in most BRITACOM jurisdictions.