To provide liquidity support for businesses affected by COVID-19, the Irish Revenue Commissioners will "warehouse" for 12 months VAT and payroll tax debts due from March 1 to the date when sectoral restrictions are lifted.
Finance Minister Paschal Donohoe said May 2 that interest will not accrue on businesses' COVID-19-related tax debts and there will be no debt enforcement actions for 12 months after recommencement of business activities. After that period, a 3 percent interest rate will apply to outstanding debts, a 7-percentage-point reduction from standard tax debt rates. The Revenue Commissioners said in a May 2 release that the agency still needs to work out the specific details of the plan.
In announcing tax measures to assist affected businesses, which were discussed at a special Cabinet meeting, Donohoe noted that businesses must remain compliant with the Revenue Commissioners and continue to file tax returns. For the warehousing plan to apply, businesses must have filed their returns according to the Revenue's guidance that was issued at the beginning of the COVID-19 pandemic.
“We now have a comprehensive suite of supports for firms of all sizes, which includes grants, low-cost loans, write-off of commercial rates and deferred tax liabilities, all of which will help to improve cashflow amongst our [small and medium-size enterprises],” Donohoe said.
The plan is intended to help businesses plan their recovery and focus on nontax liabilities. The Revenue Commissioners confirmed that the time frame to pay back warehoused debt will be flexible and determined by a business's ability to pay debts related to COVID-19 and its tax liabilities during the normal course of business. Businesses should reach an agreement with the Revenue Commissioners on an exit strategy that considers their specific needs before the warehousing period ends, the agency said.
The announcement follows businesses’ calls for Ireland to provide SMEs with additional relief from the effects of the COVID-19 pandemic, including a report from the Irish Business and Employers Confederation recommending that the government defer VAT and excise taxes and increase flexibility of tax reporting deadlines.
In addition to the warehousing of tax debts, Donohoe announced a €2 billion Pandemic Stabilization and Recovery Fund to make capital available to businesses on commercial terms and a €2 billion COVID-19 Credit Guarantee Scheme to support lending to SMEs with a below-market interest rate for terms ranging from three months to six years.