The Covid-19 virus is affecting almost every area of business and the VAT implications of Covid-19 are no different. With an unprecedented amount of employees working from home and international travel bans abound in major trading countries, Covid-19’s VAT impact is significant. The silver lining is that many governments are implementing VAT cuts and tax payment deferments to relieve the stress off businesses and the public.
VAT on Events, Conferences and Tradeshows
The outbreak of coronavirus has resulted in a colossal number of events being cancelled. From sporting events to major B2B conferences and tradeshows, companies depend on these events for their brand awareness and networking. As a result, companies have had to cancel their stands or opt as no-shows at events. However, it is possible that a company will still incur VAT on an event if you had already paid upfront for it. Your tradeshow organiser should refund you in full, but in the event where a refund is not possible, you will still be liable to reclaim the VAT. This VAT is either recoverable directly from the supplier or from the VAT authority and we are able to offer assistance in this regard. With regards to the hotel stays connected to your events or tradeshows that may need to be cancelled, if you have incurred VAT on a non-refundable booking, you should be able to claim back this VAT as well.
Domestic VAT: VAT Payment Deferments
The EU Commission has suggested countries provide Covid-19 VAT payment holidays and act in unison. As a result, many tax authorities are stepping up to the plate to help struggling businesses in this time of crisis. Tax authorities are providing a deferment of tax payments until the epidemic clears. Most EU member states have implemented some kind of Covid-19 VAT payment deferment for several months. Other countries that have implemented include Colombia, Australia, Japan, Israel, Jersey, Costa Rica, Canada, United Kingdom, Vietnam, South Korea, USA, India and Thailand with many countries to follow suit soon.
The Removal of VAT on Hotels & Accommodation
Some countries are still trying to hold onto their tourism industries by offering Covid-19 VAT cuts on hotels and accommodation. Malta, Malaysia and Indonesia removed the VAT levy on their hotel and accommodation costs. Although this gesture is well-intentioned, it may be futile due to international travel bans crippling the tourism industry.
VAT Rate Decreases
Some countries are easing the stress of the situation by cutting tax rates on certain goods and services. For example, in Norway, VAT on public transport, cinema, sporting and cultural events will be decreased from 12% to 8%. China has cut tax rates on medical services, medical necessities like masks and protective clothing, catering, accommodation and public transport. Jamaica has plans to cut its general consumption tax from 16.5% to 15%.
VAT Reclaim as a Methodology to Increase Cashflow
Foreign VAT Reclaim can be used as a viable way to inject cash into your business’s bottom line. There are many products to explore within the indirect tax and compliance industry that you may not be utilizing currently. Some countries allow you to reclaim VAT going back 4 years. There are also reclaim avenues such as domestic VAT on local T&E, excise taxes and duties and import VAT that could improve a company’s cash position and reduce tax expenses.
The Covid-19 VAT implications and the measures that various tax authorities have taken are very positive. Multinationals and SMEs alike are scared for the future but at least governments are doing what they can from a VAT perspective to relieve some of that fear.