The outbreak of coronavirus and the economic uncertainty brought about as a result, has meant that many governments and tax administrations around the world have swiftly put in place measures to try and stabilise their economies. Generally, these measures look to help businesses support employment and provide access to cash, as well as permitting the deferral of tax payments.
As has been well publicised in the UK, a job retention scheme has been introduced, which aims to encourage employers to retain their employees through the downturn, by providing capped non-repayable grants to cover wages and taxes. Canada has introduced a similar measure, in the form of a temporary emergency capped wage subsidy program, with similar steps taken by the Netherlands, Japan and many other governments globally .
The European Commission recently announced the temporary support to mitigate unemployment risks in an emergency (SURE) initiative, which aims to provide €100bn of assistance to European Union member states in the form of loans, to help cover the costs of national short-time work schemes, which essentially allow businesses to reduce employee working hours while providing income support.
The EU has also put up a €1bn guarantee to incentivise lenders to provide funding of up to €8bn to at least 100,000 European small and medium enterprises (SMEs).
The United States has introduced various liquidity measures under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, targeted at both SMEs and larger businesses, to provide emergency funding.
The UK has introduced the Coronavirus Business Interruption Loan Scheme (CBILS) to support SMEs, to enable access liquidity of up to £5m for up to 6 years, with the UK Government also pledging to cover the first 12 months of interest payments and any lender-levied fees.
The Australian Federal government has also introduced measures to effectively guarantee loans to enable SMEs to obtain funding, and China offers loan interest and repayment deferrals for SMEs, as well as subsidised business resumption loans .
Payment and reporting deferrals
Deferral arrangements come in many forms, both in terms of the deferral of certain payments, as well as the postponement of certain reporting requirements. Deferrals of reporting requirements introduced by governments in the wake of the crisis range from rescheduling the submission of financial statements and performing audits to the delayed submission of transfer pricing documentation.
Tax payment deferrals are commonplace, with many governments allowing the postponed payment of income tax, social security contributions and indirect taxes to assist businesses with cash flow.
Tax and other reliefs
There are also many sector-targeted reliefs being made available. We know, for example, that many businesses in the travel and tourism industry are likely facing one of their toughest ever challenges and some governments have therefore set up specific reliefs to assist businesses in these sectors.
Be aware and stay up to date
International businesses should therefore not only be aware of what assistance is available domestically when it comes to emergency support, but also take the time to understand what support is available in other jurisdictions they are present in, which could help them through this challenging period.
Developments need to be constantly monitored to stay up to date with what is happening and understand what help is being offered by governments across the world at what times. The support being made available is evolving quickly, adapting to the current economic impact in each country according to the impact of each phase of the pandemic. This clearly has a significant impact on businesses understanding their phased cash flow requirements. In addition, further steps may be required to access certain reliefs and other actions may be needed if reliefs currently being provided are withdrawn.
For more information please get in touch with Suze McDonald.