
How CFOs can realize the full benefit of COVID-19 tax measures
July 1, 2020
July 1, 2020
Tax relief measures play an important role as part of the broad-based initiatives that governments are undertaking to counteract the economic impact of the COVID-19 crisis. In the US alone, new business tax breaks are expected to total $650 billion in 2020 and 2021. These modifications are available broadly to companies meeting specified criteria and are designed to generate cash quickly.
Companies may, for example, receive tax credits for paying employees not to work; postpone some payroll taxes from 2020 to 2021; or offset past losses and receive tax refunds immediately. Similarly, in over 100 countries with Value Added Tax (VAT) regimes, companies may benefit from reduced rates.
Specific measures vary widely from country to country. Italy, for example, is providing a temporary 60 percent tax credit on commercial rent, while qualifying businesses in Japan may delay consumption, corporation and income taxes for one year.
In addition to responding to new tax measures, CFOs and their tax functions are still active in preparing returns, issuing VAT and other tax invoices, reconciling tax obligations with internal and external financial statements, and advising business lines on the tax implications of doing business in specific sectors and/or geographies. The new COVID-19 related measures add an additional layer of complexity to what for many companies is an already intricate system for meeting tax obligations in multiple jurisdictions.
Tax relief can help companies maintain liquidity and conserve cash for vital needs such as meeting payroll, buying goods and services and paying rent. To take full advantage of the tax measures that have been enacted, however, companies need certain elements in place, including:
The pandemic has stretched resources at many companies with teams often working from home, coping with adverse and unusual circumstances. However, there are actions that CFOs and Finance can take to manage tax cash flow while taking full advantage of measures aimed at helping their companies survive and recover from pandemic-related disruption.
The new COVID-19 related measures add an additional layer of complexity to what for many companies is an already intricate system for meeting tax obligations in multiple jurisdictions.
Taxes may be a certainty, but tax regimes will continue to change even after the temporary measures put in place to help companies through the COVID-19 crisis are no longer in effect. As more companies do business electronically–crossing virtual borders but incurring real obligations–they will encounter increasing tax-related complexity. Steps taken now to improve data quality, adopt innovative technology and make people more productive can generate immediate returns but can also help companies meet their reporting and financial requirements more efficiently in the years to come.