As the ongoing situation with COVID-19 continues to impact businesses, charities and individuals alike, European countries have implemented various measures to assist in reducing the financial consequences. This newsletter aims to provide a synopsis of the VAT related measures being taken in different Member States to aid those struggling to meet financial obligations. We have not confirmed the following directly with all the tax authorities concerned and local advice/confirmation is recommended. The situation is so fluid that changes and additional measures can be anticipated.
As a general measure, the EU has implemented a temporary suspension of customs duties and VAT on protective equipment, testing kits or medical devices such as ventilators. This relief has been granted in respect of importations made from 30 January 2020 and will remain in [place until 31 July 2020. The decision can be read in full here.
The deadline for the submission of 2019 annual returns has been extended from 30 June to 31 August. No such extension has been granted for the submission of monthly returns but taxpayers on monthly returns can apply to the Austrian Tax Authority for a postponement and payment plan. It will also be possible to negotiate penalties or interest payments. Even if a business does not receive permission to postpone, a one-week automatic extension will apply.
Austria has announced a temporary reduction in the VAT rate to certain hospitality and entertainment businesses to 5%. This temporary reduction also includes publishing. This measure will be in place until the end of 2020.
The Belgian Tax Authority extended deadlines for the submission of quarterly VAT returns as follows:
- Quarter Ending 29 February 2020 – due by 6 April 2020.
- Quarter Ending 31 March 2020 – due by 7 May 2020
The payment date has also been extended for the following periods:
- Quarter Ending 29 February 2020 – due by 20 May 2020
- Quarter Ending 31 March 2020 – due by 20 June 2020
Where it can be demonstrated that COVID-19 is causing problems, taxpayers may negotiate further extensions with the Tax Authority. The deadline for submission of the Annual Sales List for 2019 was extended to 30 April 2020.
The Belgian Tax Authority has been accelerating VAT repayments to assist businesses with cash flow throughout the COVID-19 crisis. It has now announced that businesses must submit claims for repayment by 24 May to receive accelerated repayment.
Belgium has extended the deadlines for submission of VAT returns for June and July. This means that the June return is now due on 10 August and the July return is due on 10 September.
The Cypriot Government has introduced a temporary reduction in the standard VAT rate from 19% to 17%. This commenced on 1 April 2020 and will last until 31 May 2020. The reduced rate of VAT has also been temporarily reduced from 9% to 7% from the same date until 15 July 2020.
For businesses which did not turnover more than €1Mil in the year to 29 February 2020, the deadline for submission of the VAT return for the period ending 29 February was extended from 10 April to 30 April 2020. Deferred VAT must be paid by 10 November 2020. There is also a two-month payment suspension for businesses whose turnover has fallen by more than 25%.
The rate of VAT applicable to accommodation and catering services has been temporarily reduced to 5% from 1 July 2020 until 10 January 2021.
Businesses in Croatia which struggle to meet their VAT obligations after 1 April 2020 will be permitted to apply for a three-month extension for the payment deadline; the postponement will be interest free. After this period, if the business is still struggling, it may apply for a further three-month extension.
If, after six months of interest free postponement, a business still cannot meet its VAT obligations, as a result of COVID-19, it will be possible to negotiate a 24-month, interest free, instalment plan if the business’ turnover did not exceed €1Mil in the previous year and it does not operate the cash accounting scheme for VAT.
In order to benefit from these measures, businesses must be able to demonstrate that:
- any cash flow problems are a result of COVID-19; and
- sales are 20% lower in any month than they were in that month of the previous year; or
- will fall more than 20% in the next three months.
The Czech Republic has taken limited VAT related measures. Businesses may apply to have late payment penalties and late filing penalties waived.
It has been announced taxpayers may delay the submission of Control Reports until 31 July 2020. VAT returns must still be processed on time unless the taxpayer can demonstrate that it is suffering significant hardship as a result of the COVID-19 pandemic.
On 26 May it was announced that the VAT rate applicable to accommodation and admission to cultural events will be reduced to 10%.
The Danish Tax Authority has extended the deadlines for payment of VAT returns. Monthly filings have been extended as follows:
- Quarter Ending 31 March 2020 – due by 25 May 2020
- Quarter Ending 30 April 2020 – due by 25 June 2020
- Quarter Ending 31 May 2020 – due by 27 July 2020
In addition to the extensions afforded to monthly taxpayers, quarterly filings for the first quarter of 2020 have been extended to 1 September 2020 and for semi-annual taxpayers, the first half of 2020 has been extended until 1 March 2021.
It has now been announced that large taxpayers are entitled to delay payments of VAT due relating to July returns from 25 August until 9 September 2020.
No late payment surcharges were imposed on businesses from 1 March 2020 to 1 May 2020. The Estonian Tax Authority has also clarified that it will be willing to negotiate repayment plans with reduced interest charges for businesses struggling to meet their VAT obligations as a result of the coronavirus outbreak.
From 1 May 2020, a new reduced VAT rate of 9% was introduced on the supply of:
- e-books and educational literature – excluding specified learning materials
- e-press publications excluding publications containing:
- private advertisements
- erotic content
- pornographic content
- video content
- music content
In Finland, Entrepreneurs who have a good recent compliance history may agree with the Tax Authority to defer payments from 25 March 2020 to 31 August 2020; instalments will be due three months after the agreement. Interest will apply to delayed payment but at a rate of 4%, not 7% as previously.
Finland has announced that it will offer VAT loans to businesses struggling as a result of the current crisis. Businesses will be able to apply for a temporary refund of any VAT which they have paid over in 2020. However, interest will be charged on these loans at 3%.
Taxpayers may negotiate with the Tax Authority around late payments of other taxes.It has been announced that claims for VAT credit will be speeded up to assist cash flow for businesses.
France announced on 1 May that it has extended the deadline for non-EU businesses to submit claims for repayment of VAT from 30 June to 30 September.
Germany has now confirmed that it is reducing the rate of VAT to be applied to supplies of catering. Catering has attracted the standard rate of VAT in Germany (19%), it will be liable to the reduced rate (7%) from 1 July 2020 until 1 July 2021.
The German Tax Authority has confirmed that businesses are required to apply for a delay on VAT payments until 31 December 2020 and must be able to show that COVID-19 has created challenges for a business. It has also postponed the annual VAT return deadline until 31 May 2020.
From 1 July 2020 until 31 December 2020, the German tax authority has reduced their VAT rates as follows:
- standard rate is reduced from 19% to 16%
- reduced rate is reduced from 7% to 5%
The Government has deferred VAT payments due between 20 March and 30 June. However, businesses still need to file their VAT Returns on time. If businesses usually pay VAT by Direct Debit and wish to take advantage of deferred payments, they must remember to cancel this.
The UK has introduced a zero-rate for electronic publications significantly earlier than expected, bringing it forward from 1 December to 1 May 2020. A new, temporary, zero-rate has also been introduced which will apply to domestic sales of personal protective equipment from 1 May 2020 until 31 July 2020.
Greece has announced special measures for businesses which are affected by COVID-19; it has also defined which categories of businesses it regards as affected. In order to benefit from these measures, businesses must not reduce their staff in this period. Bodies which fall within the Greek definition of “affected businesses” have had the due date for VAT payments relating to the period 11 March to 20 April 2020 – payments for this period are now due by 31 August 2020.
It has also been announced that interest and penalties will not be charged in this period. Businesses who do not reduce their staff may withhold payment of 25% of the VAT due on their April return. Despite this, the deadlines for submitting VAT returns remain the same.
The standard rate of VAT has been reduced from 24% to 6% for products used in the fight against the coronavirus, for example gloves, disinfectants and soaps.
It has been announced that the VAT rate on public transport, coffee supplies and non-alchoholic drinks will be reduced from 24% to 13% from 1 June and 31 October 2020.
The government has focused on businesses with a turnover of less than €3mil per year. For such businesses, interest will not be applied to late payments relating to January 2020 and February 2020 which usually fall due on 23 March. Additionally, all enforcement measures are to be suspended for these companies until further notice. However, VAT returns must still be submitted on time.
No general measures have been put in place for larger businesses which will need to contact the tax authorities to negotiate payment plans if they face cash flow problems as a result of the coronavirus outbreak.
From 1 September 2020 until 28 February 2021, Ireland will be reducing their standard VAT rate. The new standard rate of VAT will be 21% from 23%.
Italy has announced that businesses have been relieved of their normal tax compliance obligations except payments and, providing they bring these up to date by 30 June 2020, compliance failings will not be subject to penalties.
Additionally, Italian businesses:
- with a turnover of €2 million or less, or
- who are based in the worst affected regions (Bergamo, Cremona, Lodi and Piacenza),
may delay payments due until 31 May 2020 without incurring interest.
Prior to the Covid-19 outbreak, SDL live invoice reporting requirements were being updated commencing in October 2020. This technical update requirement will now not be enforced until 31 December 2020.
Italy has announced that non-resident businesses may delay filing their VAT returns and Annual returns until 30 June 2020.
The Latvian Government has introduced measures allowing businesses in certain sectors to pay their VAT in instalments or, alternatively, to defer payment for up to 36 months without being charged interest. Which sectors fall within this group is still to be revealed.
Claims for recovery of input VAT are also to be paid within 30 days to assist with any cash flow problems which businesses may be encountering as a result of COVID-19.
Companies which have been affected by COVID-19 may apply to the Tax Authority to defer payments of VAT for up to 12 months. It has also been announced that, generally, no enforcement measures will be taken against businesses which defer payments and no deferral interest should be charged on VAT payments that are delayed because of COVID-19.
Luxembourg has announced that no penalties will be charged for late filing of VAT returns and VAT refund claims below €10,000 will be paid without delay.
Businesses in certain sectors, including tourism and hospitality, have had the requirement to pay VAT due for March and April 2020 deferred indefinitely and interest is not to be charged on any amounts deferred.
A deferral of VAT for three months is likely to be available based on a written application. Extensions to this initial deferral are also likely to be granted. Interest at 0.01% will apply to deferred payments. However, it was announced on 27 May that this interest charge will be dropped until 1 October 2020.
The 14 April 2020 deadline for submitting the first VAT return for 2020 remains in place but the payment deadline for this return is extended to 10 June 2020.
It was announced that the reduced rate of VAT, applicable to transport, admission to cinemas and amusement services etc. would be temporarily reduced from 12% to 8% with retroactive effect from 1 January 2020 until 31 October 2020. Norway has also cut its reduced VAT rate to 6%. This reduction will remain in place from 1 April 2020 until 31 October 2020.
Whilst VAT returns are due as usual, businesses will be able to negotiate deferrals for payment of VAT with The Polish Tax Authority. It has been announced that interest will not be charged on deferred amounts.
Poland has also delayed an update of its Standard Audit File for Tax system. The new date for this update will be 1 July 2020.
The Intrastat filing deadline for April 2020 was extended until 20 May.
Businesses which are newly established, and those with an annual turnover of less than €10mil (in 2018) are able to negotiate waived penalties for late submissions and payments of VAT for the first quarter of 2020.
For the second quarter, Portugal has announced that taxpayers will be able to agree other arrangements such as paying VAT in instalments. Businesses will be able to agree a three-month payment plan which will attract no interest, or a six-month plan which will attract interest.
Similarly to Croatia, other companies may agree payment plans if their turnover in the last three months was, on average, 20% less than the same period in the previous year.
It has now been announced that VAT will be reduced on gym and health club membership to 6%.
In Romania, standard VAT compliance and enforcement actions by the tax authority have been temporarily suspended. Romania is also planning to speed up the VAT refund procedure for businesses seeking to recover input tax. Finally, the deadline for filing VAT returns for February 2020 was extended to 25 April 2020 and no late payment surcharge or interest will be charged on amounts that were due to be paid from 23 March 2020 that are not paid on time.
The Swedish Tax Authority has announced that businesses may apply to defer payment of VAT for up to twelve months, beginning retroactively from 1 January 2020. It is envisaged that this period will last until 31 December 2020.
The Swiss Tax Authority has announced that the interest rate charged on VAT which is not paid on time will be reduced to 0% from 20 March 2020 to 31 December 2020. Whilst VAT returns must be filed as usual, taxpayers can apply for their VAT payments to be deferred.
The Slovakian Government intends to permit VAT payment in instalments over 18 months, starting in July 2020. It has been suggested that this deferral should cover the quarter ending April 2020. Deadlines for the submission of VAT returns are also to be extended by 30 days. However, it appears that these arrangements may apply only to businesses that have been forced to close due to COVID 19. Legislation to introduce these measures is expected shortly.
The Slovenian Tax Authority has announced that businesses may apply for interest-free deferrals of VAT bills or instalment arrangements. There is no extension to VAT filing deadlines or general VAT payment deferral.
VAT returns must still be submitted on time, but payment can be deferred (for up to 6 months) by businesses meeting the following criteria:
- annual turnover of less than €6Mil,
- the payment required in line with the return does not exceed €30,000.
It has also been confirmed that businesses within these parameters can defer payment of import VAT and Customs Duties.
Businesses which have an annual turnover of less than €600,000 are entitled to delay the submission of their Q1 VAT returns until 30 May 2020. However, applications for deferrals are necessary.
From April 23 2020, a zero-rate of VAT is applicable to the supplies, importations and acquisitions of certain medical and sanitary equipment when the recipients are entities governed by public law, hospitals, centres for medical treatment or private institutions recognised as being devoted to the same purposes.
These special provisions relating to filing deadlines will be withdrawn by 4th June 2020.
Similarly to Greece, Turkey has announced that, for certain economic sectors, the deadlines for the submission of VAT returns for April, May and June will be extended until 27 July 2020 and VAT due in these months can be deferred for up to six months. It has also drastically reduced the VAT rate applicable to domestic flights from 18% to 1% and has made hotel accommodation and associated services zero-rated for VAT.
This newsletter is intended as a general guide to current VAT issues and is not intended to be a comprehensive statement of the law. No liability is accepted for the opinions it contains or for any errors or omissions. Constable VAT cannot accept responsibility for loss incurred by any person, company or entity as a result of acting, or failing to act, on any material in this newsletter. Specialist VAT advice should always be sought in relation to your particular circumstance.