Trying times and how tax measures can help you

MARCH 24 — Benjamin Franklin once famously said there were only two things certain in life — death and taxes. As Covid-19 spreads, there are many questions on what the future holds for us.

The Covid-19 pandemic is turning our economy upside down. More than the virus itself, accelerating panic is creating uneasiness, thanks to social media and fake news. Just in the last decade, we were talking about globalisation. Ironically, today we are in isolation.

On March 16, 2020, a nationwide 14-day movement control order (MCO) effective March 18 to 31, 2020 to contain the spread of Covid-19 was announced by the prime minister. As such, people are shunning stores, restaurants, movie theatres, offices, and other public places not by choice but by order as many of these establishments are required to be closed.

What does this mean to businesses? The MCO has indeed caused distress to businesses in many ways. Economists have warned of a global recession kicking in if the Covid-19 pandemic lasts beyond mid-2020. Businesses, governments and households will face liquidity and cash flow issues and go deeper into debt.

In times like this, it is important for businesses to stay vigilant and alert on fiscal and economic measures. In light of the Covid-19 and corresponding MCO, several tax measures have been introduced by the government to cushion the impact of this pandemic. Let’s look at some key tax measures that are relevant to businesses.

The tourism sector has been hard hit by the Covid-19 pandemic. A special concession is allowed for businesses in the tourism sector to defer the monthly tax instalment payments due in the months of April 2020 to September 2020.

If you are a travel agency, hotelier or in the airline business, you can submit an application to the Inland Revenue Board to defer the payment of monthly tax instalments.

Other businesses affected by Covid-19 are allowed to revise their tax estimates in the third month of the instalment scheme if the third instalment falls in the year 2020.

Say, for example, if the financial year-end of your business is December 31, the third instalment for the year of assessment 2020 is due for payment on April 15, 2020. You are allowed to revise the tax estimate in April 2020. There is no minimum threshold required.

The instalment scheme can be further revised in the 6th and 9th month of the financial year if required. Let’s hope that the pandemic settles by then and there would then be greater certainty on the taxes payable.

The deadline for filing of income tax return forms, which falls between March 2020 and June 2020, is extended by two months. For example, where the financial year-end of a company is August 31, 2019, the deadline to file the tax return for the year of assessment 2019 is extended to May 31, 2020 (instead of the statutory deadline of 31 March 2020).

The extension also applies to the payment of balance of tax payable of both corporate and individual taxpayers.

Sole proprietors are given a one-month extension of time until April 30, 2020 to pay the first instalment payment which is originally due by March 31, 2020.

The deadline for the submission of sales tax and service tax return forms falling due on March 31, 2020 is extended to April 15, 2020. The extension also applies to the payment of sales tax and service tax falling due on March 31, 2020.

Any withholding tax or real property gains tax which are due for payment during the MCO period can be paid by April 30, 2020 and without any penalties being imposed.

These measures essentially provide short-term cash flow relief to taxpayers. In fact, many countries around the world such as France, Germany, Italy, Spain, Ireland Luxembourg, Sweden, Australia, Singapore and Indonesia have implemented emergency tax measures to cushion the impact of Covid-19 to taxpayers. These measures range from tax cuts to deferment of tax payments.

A slew of other measures has been introduced to help businesses manage liquidity during this trying time. For example, banks are allowing borrowers to reschedule their loan repayments.

While we embrace new realities, there is a need for us to act aptly. Despite being in isolation, we can make efforts to understand tax policies and capitalise on them to minimise tax penalties as well as manage cash flows.

There will always be a silver lining in the clouds. Wishing everyone good health and be safe!

Source: Malay Mail

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