As businesses work to respond to the impact and uncertainties of the novel coronavirus (COVID-19), it’s important to stay on top of the measures that governments are taking, as well as the tax impact of business decisions - such as employee relocation and impact on supply chain.
Consider cash-flow management and planning
- Cash flows may come under pressure both during and following the outbreak period. As cash inflows could fall, enterprises will need to actively manage their cash outflows, including effective management of tax payment deadlines.
- The above could include, for example, (1) considering effect on advance tax/ withholding tax payments; (2) processing of tax refunds; (3) discharging payroll taxes and social security contributions; and (4) managing timing of GST payments.
Stay abreast of tax policies on donations/ reliefs, incentives and filing obligation
- Support in the form of donations from both businesses and individuals to affected communities and to enable medical care is always welcome. Any incentives / relief on account of such donation needs to be factored.
- Other governments in affected areas are also deploying tax incentives and relief and are considering fiscal stimulus measures that may include tax measures to promote consumption, employment and capital investment. Also, one needs to monitor any relaxation in tax filing obligation.
- Where there may be uncertainty around contracts as a result of this situation, it is advisable to consider obtaining legal advice and then engaging in proactive discussions with contracting parties, recognising the importance of longer-term relationships and the challenges faced by many businesses in the current environment.
- It is possible that this virus outbreak could be deemed a force majeure event in relation to certain contract obligations in some jurisdictions, where this would be based on precedents during the 2003 SARS outbreak.
- Also, it is important to review insurance arrangements and ensure appropriate coverage.
Consider employee and related tax requirements
- Businesses that are considering relocating employees or implementing a business continuity plan to work in a different location/ jurisdiction permanently or remotely in the interim period need to be aware of potential individual and corporate tax and regulatory implications of each arrangement and to consider quantifying associated cost to employees and business ahead of initiating the move.
- When reviewing repatriation or remote working plans, businesses need to take into consideration the potential immigration and tax compliance requirements triggered by such relocations.
- Certain businesses are also implementing alternative and flexible resourcing arrangements during this period, including unpaid or part paid leave entitlements, or compelling staff to take annual leave, or redundancy in more extreme cases. The legal and tax implications of these changes need to be carefully considered.
- To limit the risk of spread of the epidemic, one may explore the possibilities of dealing with the tax matters remotely.
- Challenges with employees needing to work remotely have caused many businesses to consider automation tools so as to conduct business operations in an orderly manner, while protecting the health of employees. One needs to ensure that appropriate technology back-up/ band-with is available for working remotely.