Weekly Tax News – 23 March 2020

Coronavirus: selective tax advantages granted in 2020 will not constitute State Aid

On 19 March, the European Commission adopted a Temporary Framework valid until the end of 2020 to allow Member States to use the full flexibility under State Aid rules to fight the economic consequences of the COVID-19. The temporary aids that the Commission will consider compatible with State Aid rules include direct grants, selective tax advantages, advance payments, state guarantees on loans, loans channeled through financial institutions and short-term export credit insurance. Tax advantages will not be considered State Aid if they are granted to undertakings that find themselves facing a sudden shortage or even unavailability of liquidity. These tax advantages should not exceed EUR 800.000 per undertaking and should be granted to companies that were not in difficulty on 31 December 2019. More specific rules apply to companies active in the agricultural, fisheries and aquacultural sectors.

EU Member States enact tax measures in response to COVID-19

In the course of last week, following the example of the Italian Government, many EU Member States have announced the implementation of tax measures to relief companies from the economic consequences caused by the emergency affecting their regions. Italy has already suspended or deferred tax declarations and tax payments due by most affected taxpayers. Furthermore, the Italian government has also decided to suspend the time limits for clearance, control, verification, recovery and litigation activities carried out by the Revenue Agency. France, Belgium and the Netherlands have already announced similar tax measures to be taken in the course of the following days.

The OECD is committed to reach a political decision in July on the international tax reform

On 17 March, the OECD has published a press release to reassure stakeholders that the Secretariat team has taken all the precautionary measures required by the French government in order to safely continue the work on the tax challenges arising from digitalization of the economy. The objective of the Secretariat remains to reach a political agreement on the key components of a multilateral consensus-based solution during the G20/OECD Inclusive Framework plenary meeting scheduled for 1-2 July 2020 in Berlin.

Tax system for frontier workers: agreement reached between 5 countries to prevent glitches due to emergency measures

On 19 March, France, Germany, Belgium, Luxembourg and Switzerland agreed to limit the consequences of keeping frontier workers at home (due to national containment measures in the face of the coronavirus) on the tax system that applies to them. The tax regime for frontier workers is regulated by the bilateral tax treaties between countries, which provide for exclusive taxation of the salaries of frontier workers in their state of residence. This regulation requires that frontier workers do not exceed a certain number of days worked outside the border area of the other state. The French authorities have confirmed that France has reached an agreement with Belgium, Switzerland and Luxembourg so that the days that frontier workers remain at home during this crisis will not be taken into account, whilst between France and Germany, this case is already covered by an amicable agreement signed in 2006.