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US - Taxpayers may elect to claim disaster losses in prior tax year

Taxpayers generally must deduct a loss under Section 165 in the tax year the loss occurs, but under Section 165(i) may elect to deduct a loss attributable to a federally declared disaster in the preceding tax year. In response to the COVID-19 pandemic, the President has issued a federal disaster declaration for all 50 states. Accordingly, taxpayers may elect to claim otherwise deductible losses sustained in 2020 and attributable to the pandemic on their 2019 tax returns. What constitutes a loss attributable to a disaster that qualifies for treatment under Section 165(i) depends on a taxpayer’s particular facts and circumstances.

COVID-19: The impact on VAT/GST systems

The COVID-19 pandemic has elicited a very different response when compared to previous financial crises. For example, governments cannot lean on policies that might increase demand, the standard fiscal stimulus for a regular economic downturn. Many governments are adjusting VAT/GST systems as a rapid response measure to assist with financial liquidity. In this Bulletin, we look at three specific areas.

Keeping up with Tax for Insurance - June 2020 edition

In this month’s edition, we present the following articles: Senior Accounting Officer: do you have a deadline on the horizon? Corporate governance response to COVID-19 and its future The benefits of real time R&D claims Operational Resilience: How to deliver on your tax needs and remain resilient Update on non-resident capital gains tax HMRC Time to Pay (TTP) Update

German government announces comprehensive €130 billion stimulus package to reverse economic damage from COVID-19 pandemic

On 3 June 2020, the committee of the German coalition government agreed a €130 billion fiscal stimulus package to mitigate the economic damage created by the coronavirus pandemic. With almost 60 cross-sector measures announced, these latest measures represent the largest economic stimulus package in the history of the Federal Republic of Germany.

Tax policy considerations in dealing with COVID-19 impacts

Alongside public health and economic measures, governments have been activating in-country tax relief measures to reduce or delay taxpayers’ tax liabilities and administrative burdens as a result of the COVID-19 pandemic. Tax authorities have been providing guidance and taxpayers have been deciding, where relief measures are not automatically applied, whether and how to avail themselves of such measures in appropriate situations.

US - IRS FAQs address NOL carrybacks to AMT tax years

The IRS recently posted to its Coronavirus Tax Relief and Economic Impact Payments website frequently asked questions (FAQs) providing guidance for C corporations planning to file Form 1120X, Amended U.S. Corporation Income Tax Return, or Form 1139, Corporation Application for Tentative Refund, on or after June 1, 2020, to carry back net operating losses (NOLs) to years in which the alternative minimum tax (AMT) applies.

US - House passes ‘Phase Four’ economic disruption relief bill

The House recently voted 208 to 199 to pass a $3 trillion ‘Phase Four’ COVID-19 relief bill that would provide additional economic assistance to individuals and businesses. While the Congressional Budget Office has not yet released an estimate of the budgetary cost of the entire legislation, the House Democratic bill includes nearly $1 trillion for state and local governments that have been impacted by the economic effects of the pandemic and over $1 trillion in tax reductions, partly offset by tax increases.

US - IRS provides travel disruption guidance on foreign branch DCL issues; Form 8858 filing

The IRS recently issued Revenue Procedure 2020-30, providing guidance with respect to certain foreign branch issues raised by the COVID-19 pandemic. Rev. Proc. 2020-30 excludes certain ‘temporary activities’ from (1) resulting in an obligation to file a Form 8858 and (2) giving rise to a foreign branch separate unit for purposes of the Section 1503(d) dual consolidated loss (DCL) rules.

European Commission reviewed work programme for 2020 - impact of COVID-19 and expectations for direct and indirect taxes

The first annual work programme of the new European Commission was published in January. The COVID-19 crisis has led to a general reassessment of the program, but the Commission is not expected to delay its most important tax-related projects. Initiatives on ‘Fighting tax evasion’ and ‘Business taxation for the 21st century’ are strategic priorities.

Financial crime in the era of COVID-19: Protection for businesses

According to PwC’s Global Economic Crime Survey 2020, over half of UK businesses reported an incident of fraud, corruption or other economic crime in the last two years. This is the highest rate recorded in the Survey and indicates an upward trend in sophisticated fraud. Should the impact of COVID-19 align with previous unprecedented events (for example the 2008 financial crisis) we can expect to see an increase in financial crime as fraudsters look to exploit areas of weakness. In this article we look at the types of financial crime that may arise during the COVID-19 pandemic and what businesses can do to minimise risk and protect itself accordingly.

New Zealand - Further economic support for businesses affected by COVID-19 - urgent legislation enacted

As businesses continue to grapple with the economic implications of the COVID-19 pandemic, the New Zealand Government has enacted urgent legislation to provide further economic support through a number of tax changes contained in the COVID-19 Response (Taxation and Other Regulatory Urgent Measures) Act 2020 (the Act). The Act gives effect to a number of tax changes which were previously announced by the Government on 15 April.

Personal tax residence and COVID-19

An individual’s personal residence position for UK tax purposes in a given tax year is generally determined by a combination of the number of days they spend in the UK and their links with the UK. A key tax risk area that individuals are facing due to the current global COVID-19 pandemic is that international travel has been heavily restricted and individuals could end up spending longer in the UK than they had anticipated. Visitors are therefore at risk of becoming unexpectedly UK tax resident, and hence taxable in the UK, through no fault of their own and without having made appropriate plans ahead of time.

Funding your R&D - understanding how external funding interacts with R&D tax incentives

On 20 April, HM Treasury launched a billion-pound support package for innovative firms impacted by Coronavirus. Whether companies are investing in new R&D projects or focused on just surviving in the current climate, this new package is aimed at ensuring Britain remains a global leader in innovation, now and in the future. Our Innovation & Capital Incentives team supports SMEs and large businesses claiming R&D tax incentives, helping them ensure their claims are optimised. The key thing is making sure that your business knows what funding it is eligible for and accessing it.

COVID-19 and corporate taxable presence

Often a company’s tax position will be heavily linked to where it is managed from and where its employees are located. This can drive both the tax residence of the company as well as the question of whether it has a taxable permanent establishment in a second territory. With global travel at a virtual standstill, and typical ways of working massively disrupted, the current environment has the potential to create significant risks in this area.

Japan's tax measures for businesses to mitigate the economic impact of COVID-19

A package of emergency fiscal measures to mitigate the economic impact of Covid-19 (“Emergency Measures”) was recently approved by the Japanese Cabinet. The package includes special tax measures for businesses, such as reductions to fixed asset and property taxes, the deferral of tax payments and social security premiums, and exemptions from National Pension Insurance and National Health Insurance premium payments.

United States: Delay of tax filings and payments is welcome relief for mobile workers, but states may not align

The IRS has expanded favorable guidance regarding the delay of filing US federal individual income tax and related returns, as well as certain tax payments – welcome news for mobile workers who may be present in an unexpected location due to the health crisis. To assist mobility professionals, the table presented in this Insight is intended to provide a short-hand reference tool, coupled with some practical tips to consider.

Dislocated employee tax issues around the globe: OECD to the rescue?

The OECD Secretariat’s recent announcement and initial analyses provide guidance on interpreting the tax implications of the COVID-19 crisis relating to dislocated cross-border workers. Many businesses have been watching for signs of global cooperation and the OECD has made a significant step towards this goal, calling on countries to “mitigate the potentially significant compliance and administrative costs for employees and employers” as well as “alleviate the unplanned tax implications.”

US CARES Act permits NOL carrybacks, increases interest deduction limitation

Tax relief measures for businesses in the ‘Coronavirus Aid, Relief, and Economic Security Act’ (the CARES Act) include a five-year net operating loss (NOL) carryback (including a related technical correction to the 2017 ‘Tax Cuts and Jobs Act’ (the TCJA)) and a change in Section 163(j) interest deduction limitations. These measures give businesses greater ability and flexibility to use NOLs and interest deductions to offset their taxable income, providing them with liquidity and a reduced cost of capital as they grapple with the economic effects of the pandemic.

US: Using tentative refund procedures to access cash from estimated tax overpayment, new NOL carryback

The recently enacted Coronavirus Aid, Relief, and Economic Security Act (CARES Act), includes a net operating loss (NOL) carryback provision allowing an NOL from tax years beginning in 2018, 2019, or 2020 to be carried back five years. The provision temporarily removes the current-law taxable income limitation and allows an NOL to fully offset income. The provision also makes a retroactive correction to the 2017 tax reform legislation to allow NOLs arising in a fiscal tax year beginning in 2017 and ending in 2018 to be carried back two years.

Australia announces international tax measures, restrictions on foreign investment and stimulus

Australia has announced a range of measures in response to the COVID-19 crisis that broadly are consistent with the global response, including economic stimulus and cash flow support measures. Measures specifically related to international tax and transactions include: 1) administrative guidance around residency and permanent establishment (PE) issues arising due to travel restrictions; 2) changes in the Foreign Investment Review Board (FIRB) framework for assessing transactions; and 3) stimulus measures that could affect cross-border transactions, including accelerated depreciation and instant asset write-offs.

United States: New ‘2020 recovery rebates’ may create inequities for mobile employees

The Coronavirus Aid, Relief, and Economic Security Act (the CARES Act), signed into law by the President on 27 March 2020, delivers relief in the form of an immediate payment from the IRS for certain individuals, including many mobile employees. Mobility programs should evaluate the impact of these potential payments and the related tax credit on their mobile populations, programs, and policies.

Singapore: CPF treatment for the reimbursement of expenses

The Central Provident Fund (CPF) Board has announced that CPF is not required on the reimbursement of expenses incurred by employees for working in different locations (i.e., not the normal place of work) due to COVID-19 and such expenses are used to defray meal, transport, lodging, or utility expenses subject to meeting certain conditions.

US: New '2020 recovery rebates' may create inequalities for mobile employees

The Coronavirus Aid, Relief, and Economic Security Act (the CARES Act), signed into law by the President on 27 March, 2020, delivers relief in the form of an immediate payment from the IRS for certain individuals, including many mobile employees. Mobility programs should evaluate the impact of these potential payments and the related tax credit on their mobile populations, programs, and policies.

US Senate passes ‘Phase Three’ COVID-19 economic stabilization legislation

The Senate late on March 25 voted 96 to 0 to pass a $2 trillion “Phase Three” COVID-19 economic stabilization package, H.R. 748, the ‘Coronavirus Aid, Relief, and Economic Security Act’ (the CARES Act), that features significant tax provisions and other measures to assist individuals and businesses impacted by the economic effects of the COVID-19 pandemic. The House passed the CARES Act without change and President Trump signed the legislation into law on March 27, 2020.

IRS updates operations status, introduces People First Initiative

Taxpayers and practitioners have had many questions about the status of IRS operations during the current pandemic. The IRS press release issued on March 24 answers some of those questions. The IRS People First Initiative unveiled on March 25 provides more clarity. At the same time, unresolved issues remain around the rapidly evolving situation. We will continue to request additional clarifications from the IRS and will provide updates on this fluid and challenging situation.

Innovation & Capital Incentives - Improving your cash position

Cash preservation and generation is the number one priority for many businesses. R&D claims are cash generating regardless of a company’s tax position and are therefore a way in which companies can accelerate cash into the business. Companies should also be considering other ways to maximise cash tax deductions, particularly in terms of capital expenditure and other incentives.

Chancellor announces measures for employees affected by Coronavirus

The Chancellor announced that the Government is going to cover up to 80% of the current wage level of an employee who is designated as a “furloughed” worker, due to the Coronavirus pandemic, provided they are kept on the employer’s payroll. There will be a ceiling of £2,500 a month on salaries to which this applies. Employers can still top up salaries above this level if they choose to.

IR35 reforms to be delayed for 12 months - update

Yesterday we reported that, against the backdrop of the challenges posed by the Coronavirus (COVID-19), the Government has announced that implementation of the new IR35 off payroll working rules, which are to apply to large and medium sized businesses in the private sector, are to be delayed from 6 April 2020 until 6 April 2021. The Government has been clear that this is a deferral and not a cancellation.

IR35 reforms to be delayed for 12 months

Against the backdrop of the challenges posed by the Coronavirus (COVID-19), the Government announced last night that implementation of the new IR35 off payroll working rules, which are to apply to large and medium sized businesses in the private sector, are to be delayed from 6 April 2020 until 6 April 2021.

Latest news - Coronavirus

Due to the Coronavirus which has now been declared a global health emergency, many employers are rightly concerned for their employees who are currently in China. So what, as an employer, should HEIs be doing?

US: House passes COVID-19 relief bill; talks continue on additional tax measures

President Trump on March 13 declared a national emergency to address COVID-19. The President’s declaration instructs the Treasury and the IRS to provide relief from tax filing deadlines to individuals and businesses, as appropriate. Specific details on disaster tax relief, including new filing deadlines and eligibility requirements, are expected to be announced by the Treasury Department and the IRS.

Australia announces tax breaks and cash flow support to help cushion the economic blow of COVID-19

On 12 March 2020, the Federal Government announced its comprehensive package (AUD17.6 billion) of measures to respond to the current economic challenges confronting the Australian economy as a result of the continued spread of the coronavirus (COVID-19). The focus of the package is on “backing business and keeping Australians in jobs” and from a tax perspective, includes significant concessions for capital investment from today in the form of enhanced tax write-offs for depreciable assets, as well as cash flow assistance to small and medium-sized businesses.