Businesses face heavy economic impacts due to the COVID-19 crisis. All the more it is important to ensure liquidity. Read here which VAT actions businesses can take.
Check potential VAT reliefs in your country
Most of the EU countries meanwhile announced specific VAT actions and reliefs due to the corona crisis. Some countries have extended the regular VAT filings and payments deadlines. Others grant low interest or interest free deferrals of VAT payments and/or a refund of VAT prepayments. We have collected an overview of the VAT related options in selected EU countries which will be regularly updated. You can find this overview HERE.
Avoid unnecessary penalties and interest
Apart from current tax reliefs in the COVID-19 crisis, most of EU countries charge late filing and late payment penalties. Thus, taxpayers should ensure an adherence to the applicable deadlines for VAT filings and payments. Beyond that, some EU states charge interest on additional VAT payments which can particularly due to a VAT audit. Main examples here are the rejection of initially claimed VAT refunds or not declared VAT payables. Avoid these unnecessary payments by a proper review of the declared VAT payable and VAT receivables.
Consider a change of your VAT filing period
Taxpayers have to report and pay VAT per VAT filing period. The length of the VAT filing period regularly depends on the sales volumes of the business. For larger businesses, most EU countries stipulate monthly filing periods resulting in monthly payment obligations. However, some EU countries allow to change to quarterly or semi-annual VAT filing periods or to combine VAT filing periods. This for example applies to Denmark.
But be careful: If you expect to be in a VAT refund position, these extended payment deadlines regularly also apply to VAT reclaims. Thus, in these constellations longer VAT filing periods are harmful for your liquidity.
Manage your general VAT payables and VAT receivables
VAT payable basically already occur once the supply or service has been carried out. Under most country VAT laws this happens irrespective of a customer payment. Exemptions may apply under special schemes, eg for small entrepreneurs or freelancers. Another exemption are prepayments in the meaning of Article 65 VAT Directive (more information under VAT handling of down-payments). Apart from this, suppliers must pre-finance output VAT if the customer payment is received after the VAT payment deadline. If possible, suppliers should therefore shorten customer payment terms and ensure a timely payment respectively. As additional measure, a switch from paper invoicing to e-invoicing as allowed under the VAT Directive may be considered.
Vice versa, VAT refund claims relating to VAT payable to suppliers in a first step regularly also do not require an actual payment to the supplier. Most countries allow a VAT refund already once the customer has received a proper invoice. Thus, businesses can improve their cash position by agreeing with their suppliers direct invoicing combined with long payment terms.
Deferment of Import VAT
Several countries allow for a deferred Import VAT payment in the (later) regular VAT filing instead of an earlier direct payment upon customs clearance. Businesses entitled to a VAT refund of these Import VAT can then directly claim the refund in the same VAT filing. This effectively avoids any cash (pre-)payments of Import VAT.
Review local debt bad relief options
Suppliers owe the VAT charged to customers to their tax office. If customers due not pay their debts, suppliers can normally accordingly adjust the VAT payment duty. Respective EU country rules and requirements differ. Currently, some EU countries may apply more generous assessments as specific VAT action due to the COVID-19 situation. Thus, it is recommendable to check the local rules. In general, however, debt bad reliefs require a proper documentation of the situation. Thus, suppliers are advised to collect the relevant proofs.
Speed up foreign VAT refund
If your business incurred foreign VAT you may be entitled to claim a refund from the respective foreign tax authorities. This particularly applies to EU businesses which paid VAT of another EU country. For more information about the reclaim of foreign VAT of other EU states check out this website of the European Union. As one specific VAT action in the COVID-19 situation, some EU countries have announced to accelerate the current foreign VAT refund procedure.
Offset VAT with other taxes
Some countries allow to offset VAT refunds with other cash tax payables. This for example applies to Finland, Germany and the Netherlands as regards the netting of VAT receivables with wage tax payables.
Use local VAT grouping options
Various EU countries have implemented VAT group schemes. Examples are Italy, Germany and the Netherlands. The specific country rules and requirements differ and some local rules restrict this option only to certain businesses. However, most of these schemes allow the netting of VAT payable and receivable between VAT group members. Furthermore, transactions between group may be VAT neutral transactions. Additionally, it may be possible to file one combined VAT return for all group members which therefore reduces administrative burden. Thus, this option might be an efficient VAT action particularly in the current COVID-19 crisis.
Adhere to VAT refund compliance
Adherence to VAT refund requirements is of course no special VAT action in the current COVID-19 crisis but generally required. Nonetheless, due to the fundamental relevance of this topic taxpayers should particularly now keep an eye on this to avoid unnecessary VAT refund discussions with tax authorities. If VAT is invoiced by suppliers, a respective refund requires a proper invoice. Thus, ensure to check if all incoming invoices fulfill this requirement.
Ensure sufficient VAT know how in your organisation
Ensure a basic VAT know how in your organisation. We explain the basic rules in our Online courses VAT – Basic online course (with certificate) and VAT & B2B transactions (E-Learning with certificate). Currently, we offer a 30% discount on all our products to support our customers in the COVID-19 crisis. When you purchase products via our onlineshop, please enter the code specialdiscount (one word) in the field “coupon code”. Then press the “apply coupon” button. The 30% discount will be directly deducted from the net price of the product. If you wish to purchase more than one training, we offer special corporate rebates. For more information please email us to info[at]lawinpractice.eu or use our contact form.