Like most functions, many tax teams have had their hands full for the past several weeks. Not only are some of them still figuring out how to work together virtually, they’re also attempting to manage day-to-day compliance while keeping up with the flood of tax measures from jurisdictions aimed at mitigating COVID-19’s economic impact.
When KPMG professionals polled tax and business leaders during a recent webcast on how their organization is ensuring oversight of tax compliance during this time, the most common responses were (in ranked order):
- keeping up with COVID-19 related tax reliefs from governments
- managing filing deadlines as usual
- leveraging technology
- shifting the tax team’s primary focus to compliance.
One-third of respondent organizations said they are engaged in all of the above.
The introduction of the EU Mandatory Disclosure Regime (commonly referred to as DAC6) is another example of legislative requirements which will impact businesses during this uncertain times. DAC 6 sets minimum standard for reporting on certain cross-border arrangements by intermediaries (or in some cases taxpayers) for all taxes of any kind with the exception of: VAT; customs duties; excise duties and compulsory social contributions. As a result of the impact that COVID-19 is having on businesses, some industry trade groups have requested the EU Commission for a deferral of the implementation date of DAC6 from 1 July 2020 to 1 January 2021. It is not clear what stance the EU will take, but even if they do announce a delay in implementation, it is still unclear how it would be implemented practically.
In terms of COVID-19 relief, many tax teams are working the implications of deferred tax filing and payment deadlines, as well as delays for filing financial statements. Getting provisions, liabilities and assets valued is tricky in current conditions. Any reliefs claimed need to be reflected in the financial accounts, and that can affect valuation allowances, reserves and other accounts, especially to the extent decisions were based on forecasting.
After seeing little change in the tax accounting area for several years, tax teams need to manage much of this complex work in a tight timeframe. Tax teams are advised to stay in close contact with their auditors to understand how much precision is needed in these extraordinary times so they can avoid a disconnect between what auditors expect and what companies can produce, for the current quarter and future periods.