Member Article

To mitigate the economic impact of the Coronavirus (COVID-19) pandemic, certain extraordinary measures have been taken in the field of taxation. The aim of these measures is to ensure the cash flows of companies and to allow some flexibility in complying with tax obligations and in the payment of taxes by companies and individuals. The measures also recognise specific situations that amount to a justified impediment that makes it possible to postpone certain steps or extend certain procedural and administrative deadlines.

These are the highlights of the measures that have been introduced:

1. Extension of deadlines to comply with tax obligations

Order 104/2020-XXII of 9 March 2020 of the Secretary of State for Tax Affairs provides for the extension of deadlines, with no increases or penalties, for voluntary compliance with various tax declaration obligations. These include:

• The deadline for the special payment on account that normally has to be made during the month of March has been extended to 30June 2020;

• The deadline to file the personal income tax (IRS) return (Form 22) for the 2019 tax year has been extended from the end of May until 31 July 2020;

• The deadline for the first payment on account and the first additional payment on account, which normally have to be made in July, has been extended to 31 August 2020.

2. Split payment of taxes (VAT and personal and corporate income tax)

With regard to VAT payments under the monthly and quarterly arrangements, and to the payment to the State of amounts withheld as corporate income tax (IRC) and as personal income tax (IRS), the taxable person may opt for the following payment methods: (i) immediate payment on the usual terms; or (ii) payment split into three or six monthly instalments and, for this purpose, an application must be submitted electronically before the end of the period for voluntary payment. Interest does not apply and it is not necessary to provide a guarantee in any of the options for split payment.

The possibility to split payments only applies to taxes whose taxable event occurred as from March (with a payment date in April).

These arrangements apply to self-employed workers. They are also available to companies (i) with a turnover of up to EUR 10 million in 2018, (ii) companies that started or restarted their activity on or after 1 January 2019, and (iii) companies whose activity falls within sectors closed down under Decree-Law 2-A/2020 (for example, recreational activities, leisure and entertainment, cultural and artistic activities, sports, etc.).

The other companies and self-employed workers can apply for the flexible arrangements described above if they can demonstrate that they have suffered a decrease in turnover of at least 20% on the average of the three months preceding the month in which the payment obligation arises, compared with the same period of the previous year.

When the communication of invoicing information through the E-Fatura system does not reflect the totality of the operations carried out that are subject to VAT (even if exempt), the fall in invoicing levels can be measured by reference to the turnover.

In any of these cases, the proof of the fall in invoicing levels must be demonstrated by certification from the statutory auditor or certified accountant.

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