COVID-19 phased payment plans – interrelation with tax liabilities due on 15 June 2021

Since the beginning of the COVID-19 pandemic, many companies have made use of simplified payment options – in particular, deferred payments. Tax liabilities that were due by 31 May 2021 have been automatically included in approved deferrals.

The deferred tax liabilities are now due by 30 June 2021. To avoid payment difficulties, a special application for a phased payment plan (payment in installments) can be submitted as part of the COVID-19 phased payment model. Applications can be made in the period 10 June 2021 to 30 June 2021.

Taxes due by 15 June 2021

The question arises as to what approach should be taken if taxes are due after 31 May 2021 and before 30 June 2021. These are no longer covered by automatic deferral until 30 June 2021. This includes, in particular, pre-payments of VAT for April 2021 and wage taxes for May 2021. Both taxes are due by 15 June 2021.

If these taxes are to be included in the COVID-19 phased payment model, it is in our view necessary to declare both these tax claims as soon as possible and include them in an application for phased payments, which would need to be submitted by 15 June 2021 at the latest.

Main points of the COVID-19 phased payment model

• Phased payment applications can only be submitted for tax liabilities that were predominantly (more than 50%) due between 15 March 2020 and 30 June 2021.
• The phased payment model is designed as a two-phase model:
  • • Phase I includes 15 phased payments (months) from July 2021 to September 2022
    • Phase II includes 21 phased payments (months) from October 2022 to June 2024
• The amount of the phased payments must be appropriate, which means it must be based on the financial situation of the applicant.
• A “safety car phase” is envisaged for the first 3 months. In this phase, the amount of the monthly installment must constitute at least 1% of the tax liabilities. If a company has significant liquidity problems (and can demonstrate this accordingly), the phased payment can also constitute “only” 0.5% of the tax liabilities.
• The phased payments can be arranged flexibly (meaning e.g. that the rate of the phased payments can be lower in the first months).
• However, in Phase I, at least 40% of the outstanding taxes must be paid and no deadlines may be missed if the company also wishes to make use of Phase II.
• The late payment interest for the full period (July 2021 to June 2024) will be 2% above the base rate (effective: 1.38%).
• All future taxes not covered by the phased payment agreement must be paid in a timely manner. Additional, no further grant of a payment facilitation (deferral or payment plan) in addition to the COVID-19 phased payment model is possible.

Our procedural law experts would be happy to advise you on the preparation of an application for COVID-19 phased payments.