COVID-19: Individual Income Tax Responses
The economy, healthcare systems, and our broader communities are all being impacted by the global COVID-19 pandemic. In response, countries across the globe are acting swiftly to address the socioeconomic impact of the pandemic, including, but not limited to:
- Traveling and gathering restrictions
- Public funding expenditures
- Corporate/VAT/self-employment amendments
- Remote working guidance, and unemployment benefits
This update is intended to focus solely on the responses that governments have made with regards to individual income taxation as of May 12, 2020. This post is an update of my original article published on March 31, 2020 and the ensuing updates posted on April 14, 2020, April 23, 2020, and April 30, 2020. Numerous notes and locations have been added to this expanded version.
Country-by-country Individual Income Tax Responses
- A one-time payment of ALL 40,000 is available to certain eligible employees, depending on: (1) the type of sector and entity they are employed in, and (2) earning less than ALL 2,000,000 in 2019.
- Private sector employers are required to pay the employee their salary plus the social security contribution (3% of the employee's salary) in April, May and June 2020.
- An 'emergency family income’ one-time payment in the amount of ARS 10,000 for qualified unemployed and low-income workers.
- Temporarily reduced minimum drawdown rates for superannuation.
- Temporary early release of superannuation, up to $10,000 of 2019-2020 superannuation, and $10,000 in 2020-2021.
- $750 tax-exempt payments to social security, veteran, and other income support recipients and concession card holders: first round: 3/31/20, second round: 7/13/20.
- Filing deadline extended to August 31, 2020.
- Automatic two-month extension of tax year 2019: individual income tax return due date moved to May 12, 2020. No penalties or late payment interest will be assessed.
- Deferral of payment of withholding and/or personal income tax for individuals able to demonstrate they are negatively impacted.
- Taxable income support payment to eligible workers with loss of income, CAD 2,000/month, up to four months. In order to receive the payment, an individual must meet the eligibility requirements:
- Have stopped working due to COVID-19, and not have access to paid leave or other income support
- Be sick, quarantined, or taking care of someone who is sick with COVID-19
- Be a working parent who must stay home without pay to care for children
- Be employed, but not being paid because of an employer directive
- Be a wage earner or self-employed individual who would not otherwise be eligible for Employment Insurance
- Not have voluntarily terminated their employment
- The minimum required annual withdrawal payments from Registered Retirement Income Funds (RRIFs) and Registered Pension Plans is reduced by 25% for 2020.
- The goods and services tax (GST) credit is doubled for the 2019-2020 benefit year.
- 6-month suspension on the payment of interest and principal on Canadian student loans, to September 30, 2020.
- Temporary increase of the Child Care Benefit, up to $300 per child.
- Filing deadline extended to June 1, 2020.
- Up to CAD 500 can be reimbursed tax-free for telework equipment for employees working from home
- Comprehensive support of nearly CAD 9 billion has been announced for post-secondary students and recent graduates in the form of cash benefits, grants, job creations/placements, training opportunities, and financial support.
- Temporary personal income tax exemption for tourism and aviation sector employees.
- Subsidies and bonuses received by medical workers participating in epidemic control and treatment are exempt from individual income tax.
- Charitable contributions to epidemic control and treatment are fully deductible for individual income tax.
- Mandatory employee and employer contributions to pension funds for April and May 2020 have been reduced from 4% to 0.75%, and 12% to 2.25%, respectively.
- Effective March 1, 2019, Cyprus implemented a General Health System (GHS). The employee rate of contribution is 2.65% up to a maximum contribution of EUR 4,770. The employee General Health System (GHS) rate of contribution is temporarily reduced from 2.65% to 1.7% for a 3-month period: either March – May, or April – June, depending on employer implementation.
- Filing deadline extended to July 1, 2020. No penalties or late payment interest will be assessed.
- Filing deadline extended to September 1, 2020.
- Filing deadline extended to May 29, 2020.
- Temporary suspension of contributions to the mandatory funded pension scheme.
- French tax authorities issued a clarification that the COVID-19 lockdown should not have consequences related to taxpayers’ residency status under domestic law and existing tax treaties. Under domestic law, days spent in country due to exceptional circumstances are not taken into account, and therefore a temporary stay because of voluntary isolation or travel bans will not impact residency status. Similarly, under tax treaties, authorities have indicated that the pandemic is a situation of force majeure, and therefore should not be considered to have their permanent residence or center of vital interests in France during the lockdown.
- Reduced hours compensation benefit rules have been adjusted to conform to current needs.
- Enforcement measures and late payment penalties are waived until December 31, 2020.
- Employees working from home due to the COVID-19 pandemic are allowed to deduct additional expenses incurred on light and heat energy for an amount of GBP 3 per week.
- Payment deadline for salaries tax and personal assessment are automatically extended by three months.
- Temporary abolition of payroll taxes and social insurance contributions for taxpayers in defined affected sectors (hospitality, transportation, entertainment, etc.).
- A one-off child benefit payment will be distributed on June 1, 2020 for all families with children under the age of 18. The benefit will be ISK 40,000 per child for average monthly income less than ISK 927,000 and ISK 20,000 per child for monthly income in excess.
Isle of Man
- Employers are able to reimburse up to GBP 8 per week tax-free for household expenses incurred by employees working from home
- Filing deadline extended to June 30, 2020.
- Filing deadline extended to April 30, 2020.
- A Temporary Wage Subsidy Scheme has been announced, with employers refunded up to 85% of qualifying employee wages.
- Companies must pay an extraordinary bonus of EUR 100 for the month of March to all employees with annual income less than EUR 40,000 in the previous year.
- 15 days parental leave at 50% wage, or a EUR 600 bonus for employees with children under the age of 12.
- Filing deadline extended to April 16, 2020.
- Allowances provided to healthcare employees working in pandemic activities are exempt from income tax and social security contributions.
- The Tax Laws Act 2020 was enacted on April 25, 2020 intended to relieve taxpayers of the effect of the COVID-19 pandemic. Annual resident personal relief has been increased from KES 16,896 to KES 28,800. The individual income tax rates for individuals have been revised, with the top marginal rate reduced from 30% to 25%.
- 3-month (April, May, June 2020) exemption of income tax on salaries for individuals earning less than LAK 5,000,000 per month.
- Suspension of days limitation for Belgian, French, and German teleworkers to avoid taxation by country of residence.
- Parents of school-aged children working in the private sector that cannot fulfill their work obligations remotely are eligible for a direct payment of EUR 166.15 per week.
- 90-day payment deferral of individual income tax and social security contributions due in March, April, and May 2020.
- Effective March 23, the payment of social security is suspended.
- A tax-free assistance allowance (up to MAD 2,000) will be granted to employees enrolled with the Caisse Nationale de Sécurité Sociale (CNSS)
- A 3-month delay in payment of mortgage and consumer loans
- A one-time emergency income grant of NAD 750 to eligible Namibian citizens between the ages of 18 and 60.
- Deferral of payment of individual income tax for individuals able to demonstrate they are negatively impacted.
- A 0.01% discount for early payment of tax due is available for certain taxpayers.
- Travel allowances of a ‘fixed and equal’ nature during the state of emergency may be provided tax free if certain conditions are met.
- Under the work-related expenses scheme, an employer may provide a tax-free payment of up to 1.7% of total salary (up to EUR 400,000). The percentage has been increased to 3%.
- Mortgage payments may be suspended for up to 6 months, with the suspension beginning no later than July 1, 2020. Repayment plan requirements must be met in order for mortgage interest to continue to be deductible for owner-occupied dwellings.
- Permanent increase in social welfare benefits.
- Temporary doubling of the Winter Energy Payment.
- Enabling working families with children to receive the Work Tax Credit, without meeting the minimum working hours test.
- Threshold to pay provisional income tax for tax year 2020/2021 increased from NZD 2,500 to NZD 5,000.
- 180-day moratorium on residential mortgage obligations obtained by individual contributors under the Nigerian Housing Fund (NHF).
- Employers obligation to withhold 10% of salary for private pension contributions is suspended.
- Filing deadline extended to June 30, 2020.
- Filing deadline extended to July 31, 2020.
- Filing deadline extended to July 15, 2020.
- Income tax exemption of assistance payments granted by employers, and special distributions from retirement accounts.
- An additional 3% tax credit is provided to individuals with income below $100,000
- Exemption from individual income tax (up to $4,000) for:
- Special payments for assistance by employers to employees who have not worked during the lock down period
- Special distributions from retirement plans and retirement accounts
- Benefits in kind provided to ‘vital’ employees (as defined by the employer) that are isolated during the state of emergency are not subject to tax and social security contributions.
- Filing deadline extended from April 18, 2020 to May 31, 2020.
- Central Provident Fund (CPF) contributions are not required on the reimbursement of expenses (such as meals, transportation, lodging) for employees working in a different location due to COVID-19 issues, such as working from home or overseas. Cash allowances given to employees would still be subject to CPF contributions.
- A one-off cash payout will be provided in August/September 2020 to all Singaporeans aged 21 and above. The amount is $300, $600, or $900 depending on 2019 assessable income, with an additional $300 for each eligible parent, and an additional $100 for Singaporeans aged 50 and above.
- Contributions to the COVID-19 Response Fund are fully tax deductible.
- Employees not able to work, or whose employers are temporarily unable to ensure work are entitled to reimbursement of salaries and exemption from social security contributions.
- Employees receiving salaries from companies with a revenue decrease of at least 20% compared to 2019 are exempt from pension and disability contributions (subject to further qualifications).
- Tax subsidy of ZAR 500/month for the next four months for private sector employees earning less than ZAR 6,500/month.
- Deferral of payment deadline of tax not exceeding EUR 30,000 from March 13, 2020 to May 30, 2020.
- The filing deadline has been extended to May 31, 2020.
- Filing deadline extended to June 15, 2020.
- Filing deadline for impacted individuals extended to June 30, 2020.
- Filing deadline extended to August 31, 2020.
- Health insurance premium deduction increased from THB 15,000 to THB 25,000.
- An exceptional temporary contribution will be levied on employment income received for April 2020. The contribution is equal to 1 day of salary income, and is to be withheld by the employer.
- Statutory Sick Pay (SSP) is expanded for eligible individuals diagnosed with COVID-19, or those that are unable to work due to self-isolation.
- HMRC will reimburse 80% of furloughed workers wage costs, up to £2,500 per month. Employers can choose to cover the remaining wage gap.
- Universal credit standard allowance increased by £1,000 per year, and the minimum income floor is suspended.
- Off-payroll working rules, designed to address non-compliance in pay and employment taxes of contractors, are delayed 12 months to April 6, 2021.
- U.S. Tax Update: State Income Tax Responses to COVID-19
- United States Income Tax Responses to COVID-19
- What is the impact of U.S. tax stimulus payments to Global Mobility? [includes Stimulus Calculator]
- The IRS has issued Revenue Procedure 2020-20, which notes that travel restrictions due to COVID-19 may have affected the travel plans of foreign individuals who are present in the United States and intended to leave but were unable to do so. Therefore, the IRS is providing the relief (under qualifying circumstances) in the form of up to 60 consecutive calendar days of US presence will not be counted for purposes of:
- The US residence test (i.e. the substantial presence test) of IRC section 7701(b)(3); and
- Determining eligibility for the exception under the Dependent Personal Services article of many US income tax treaties for non-residents who are physically present in the United States for not more than 183 days in any twelve-month period that begins or ends in the relevant taxable year.
- Relief is already provided in both of the above areas for medical conditions. Revenue Procedure 2020-20 establishes an exception for travel restrictions due to COVID-19, referred to as the COVID-19 Medical Condition Travel Exception, and the requirements to claim the exemption.
- The IRS has updated the list of countries for which qualified individuals can exclude a limited amount of foreign earned income from US taxation and claim an exclusion or deduction for certain foreign housing costs, known as the US Foreign Earned Income Exclusion. The Exclusion under IRC §911 applies if either the foreign residence test or the physical presence test is met for specified periods of time. These time requirements can be waived under section 911(d)(4) of the due to adverse conditions such as war, civil unrest, or similar conditions, that prevented the normal conduct of business.
- Revenue Procedure 2020-27 notes that COVID-19 is an adverse condition that prevents the normal conduct of business in 2019 and 2020 as follows:
- In the People's Republic of China, excluding the Special Administrative Regions of Hong Kong and Macau (China), as of 1 December 2019; and
- globally, effective as of 1 February 2020.
- The period covered by Revenue Procedure 2020-27 will end on 15 July 2020 (unless further extended). An individual who left China after 1 December 2019, or another foreign country after 1 February 2020, and on or before 15 July 2020, would be treated as a qualified individual with respect to the period during which that individual was present in, or was a bona fide resident of, that foreign country if the individual establishes a reasonable expectation that he or she would have met the requirements of IRC section 911(d)(1) but for COVID-19.
- Introduction of a new tax called ‘Sanitary Emergency COVID-19 Tax’, levied on income derived from personal services rendered to the state, departmental governments, state entities and decentralized services during April and May 2020 (and possible extension of additional 3 months).
- The amount of tax-free benefits that can be provided by the employer is increased from 4.22 to 7.5 times the monthly minimum salary.
- Payment deadline for the 2019 personal income tax return is extended to December 31, 2020.
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A changing world amidst the spread of COVID-19
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