Indirect tax being everywhere, COVID-19 triggers VAT and customs challenges but also opportunities. In-house indirect tax teams must therefore stay tuned to help the business going through these turbulent times.

Challenges….

Your business is slowing down, you are facing sourcing issues, your deliveries are delayed, your invoices remain unpaid, cash flow becomes a concern, etc. COVID-19 triggers many challenges.

Of course, businesses are impacted differently but many of them have to respond quickly to these challenges notably by revisiting their supply chain but also looking for cash optimisations.

Changing the supply chain on such a short term may be vital but must be carefully analysed from an indirect tax perspective to avoid/mitigate adverse consequences (e.g. additional VAT registrations, VAT leakage, VAT prefinancing, additional customs duties, export controls issues, etc.).

…but also opportunities

As a coin has always two sides, changing the supply chain may also trigger opportunities (e.g. use of free trade agreements to reduce customs duties, VAT de-registrations, etc.).

Moreover, in such turbulent times, indirect tax has always been one of the most efficient ways to improve cash. Indeed, many countries have specific VAT schemes/rules that could help now but also in a “normal” business environment (e.g. import VAT deferment license to avoid import VAT pre-financing, exempt imports, reverse charge mechanisms, consignment stocks simplification, simplified triangulations, etc.). Businesses should also (re)consider VAT refunds possibilities, tax points rules, VAT filing periodicity, etc. Last but not least, there are opportunities to reduce your payable VAT towards the administration by using the bad debt relief rules.

Simultaneously tax/customs authorities around the world are conscious of the current challenges and announce daily payment facilities and other tax “relaxation” measures. For example, Italy has already announced upcoming decrees to postpone VAT payment and reporting obligations whereas Norway will reduce its reduced rate on some entertainment services.

What is next ?

During these turbulent times in-house indirect tax teams must:

• Stay (virtually) close to the business to anticipate any adverse indirect tax implications but also identify opportunities;
• Explore any VAT cash optimisations available in the countries where their business is active. Cash flow management must indeed be part of businesses overall COVID-19 short-term action planning ; AND
• Closely follow the “relaxation” measures that tax/customs authorities take around the world to help business going through these difficult times.

Don’t hesitate to consult our news regarding COVID-19 on our website.

Take care!

If you would like to discuss more on this topic, please do reach out to our key contacts below.

Key contacts

Constant Dimitriou - Director, Indirect Tax

Constant is an Indirect Tax Director within Deloitte in Switzerland with more than 15 years of experience in EU VAT and Swiss VAT covering all industries, especially the trading sector. He specialises in advisory on complex international supply chain projects (structuring and optimization), VAT reviews, due-diligences, assistance with VAT audits and report and compliance.

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Coralie Dumoulin - Senior Manager, Indirect Tax

Coralie is an Indirect Tax Senior Manager within Deloitte in Switzerland with 10 years of experience in VAT, working notably, for a Swiss multinational company of the Manufacturing and Consumer Business sector, prior to joining Deloitte, and doing a 3-years secondment at Deloitte European Tax Center. Coralie has a wide experience in many Swiss and European VAT matters, including practical skills in dealing on a day-to-day basis with the systems.

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