Government measures and can tax optimisation still be done in 2020 for the 2019 tax year?

I firmly believe that we will make it through Easter with or without repression in at least the same cloak and dagger and glove attitude as the last few days. And perhaps then there will be room for a gradual opening up of the economy (albeit with veils). In an interview with Trend, which was filmed 1. April I was still quite skeptical about the light at the end of the tunnel. I must admit that looking from Rosum towards Eurovea was the first time I hadn’t seen holograms of Klinger, Eurovea 2 skyscraper, the whole Skypark or the new convention centre. What usually falls victim in a crisis are spectacular real estate projects. Fail to meet the quota (leased space, sold apartments,…) for the next loan tranche from the bank and the whole project may end up like Yosaria Plaza in Ružinov or the Spanish airports during the 2008-2012 crisis. And I think this crisis has the potential to be much more dramatic than the potential of the Fannie Mae and Freddie Mac problems in 2007 (the US bubble and the emergence of toxic assets), which resulted in up to 14% unemployment in Slovakia in 2013 (up to 6 years after the problem arose).

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On 2 April, however, Switzerland was the first country in Europe (there may be others) to see a reduction in the number of active cases (more people were cured than infected on that day). 4. Austria also joined in April. So-called. The growth index was up for the first time since 23.2. two days in a row below the coefficient of 1, which indicates some hint/suggestion of a decline. Even good weather and government measures bring hope. But while the weather is supposed to be consistently positive for the next few days, government measures are naturally not yet able to satisfy (fully) all hungry mouths. A number of entrepreneurs with lower sales may have invested in illiquid assets (since what drives the economy and our standard of living is mainly that the money is spinning) and their employees may have salaries higher than the average monthly wage and there is naturally a big problem keeping it together.

Government measures

I spent all this weekend reading those lex-COVID laws and resolutions, and I have to say that given the shortness of time, the pressure and the enormous complexity of the issues that the drafters had to take into account, I consider the following measures 1. aid as being of good quality not only from a legislative point of view, but also, after further reflection, from an economic and social point of view. Those contributions for employers and self-employed, sick pay, unemployment benefit and nursing allowance are mainly social transfers. And social transfers so that we don’t have looting of shops here, because our numerically modest army might not help us. A company with employees on €2,000 wages and a drop in sales is not going to be very happy with them – there is probably an assumption that the financial potential (i.e. savings, unemployment benefit) to socially overcome the crisis is greater for the employees as well as the employer. On the other hand, in a post-corona world, positivity will need to be restored to the consumer and investment mood. Governments do this by encouraging lending or even, to encourage consumption, by “throwing money out of the helicopter” (see US).

For simplicity’s sake, we try to give clients those government measures in a headline form, and then we stop at each client individually. So today we have mainly these types of help on the table:

• Postponement of income tax returns and advance income tax payments until the end of the calendar month following the month in which the pandemic ended;
• Deferment of levies if your net sales have fallen by more than 40% year on year;
• Employer’s allowance for an employee to whom you are unable to assign work due to a drop in sales of more than 20%;
• Extension of sick leave + the possibility to go on sick leave directly with parental leave (useful for employees with children and thus reduces the company’s costs);
• Exemption from several obligations in tax proceedings (e.g.: suspended tax audits or tax executions);
• Assistance with financing through bank guarantees or interest payments;
• Changes in the Labour Code in favour of the employer;
• Extension of unemployment benefits (a very effective safety net for employees in the event of layoffs);

For each client, the most effective use of these measures is subject to individual assessment. Individual measures (especially the contributory ones) are in some cases easy to abuse and thus to use them contrary to their intended purpose. The one I understand is to help keep jobs, particularly in low-income groups; that is, a form of social transfer. When someone asks me about the lack of ethics and morality in tax optimization, in addition to the standard defensive explanation of the illogic of such reasoning, I sometimes go on the counterattack, as in the case of the Panama Papers interview (see the second paragraph of the article). But to put it in perspective, I find the misuse of these contributions contrary to their purpose in today’s situation to be grossly unethical and advisors should distance themselves from it. I find the legal reduction in tax liability for 2019 to be absolutely ethical.

Tax optimisation 2019

The government’s measures therefore provide a solution for companies in terms of the tax burden for the pandemic period, but what they naturally do not and probably cannot address is the tax liability. Even if companies are in loss for the following months/years, they will not pay income taxes. However, the 2019 tax liability will still apply to them and we can be of assistance there. In the interview, I mentioned some of the options for reducing 2019 taxes in 2020 as well. We have more options listed on our website www.zachranfirmu.sk with a link to a webinar on tax optimization. I’d love to see you there (logged in).