Business disruption
As US and global economies respond to disruptive events — including the COVID-19 virus — Tax Departments are forced to re-prioritize their tax agendas. Key focus areas during this time are liquidity, meeting existing compliance burdens with shrinking resources and potential opportunities to respond more flexibly to rising uncertainties.
Though the priority remains on human welfare, companies are facing unprecedented people and productivity challenges. Evaluate:
- Developing workforce and remote work solutions
- Filing for bankruptcy
- Mitigating subpart F income on sales
- Developing restructuring plans
- Reviewing for increased PE risk
- Reviewing intra-group services expenses and expense allocation
Cash tax savings
Your business should consider how to effectively manage cash taxes by potentially reducing taxable income, obtaining available refunds and effectively manage required tax payments. Any strategy to reduce federal taxable income should be modeled against your company's overall tax posture to ensure that decreasing the federal taxable income does not create or increase other tax liabilities (e.g., Base Erosion and Anti-Abuse [BEAT]).
Tax directors also should work with the Treasury function to align repatriation strategies and with the Finance function to align financing options to achieve liquidity. Consider:
- Computing corporate estimated tax payments
- Accounting methods studies
- Reverse income tax audits
- Reverse sales tax audits
- Liquidity, lending and capital resource solutions
- Increasing use of exemptions and holidays
- Leveraging tax reform: Modeling BEAT and Section 163(j)
- Employment tax refund reviews
Cross-border transactions
In today’s globally connected society, events happening around the world impact our people, our businesses and our economy. Due to the economic disruption triggered by COVID-19, supply chains and business strategies are being reevaluated. As a result, more agile tax models are needed. You may consider taking action to stabilize your supply chains, brace for an unpredictable revenue and profitability mix in key markets, or reduce costs and increase productivity. Review:
- Global structuring
- Holistic modeling of the tax impacts of economic disruption
- Repatriation
- VCT(venture capital trust)/operating model evaluation
- Meeting regulatory obligations
Global mobility
Global mobility issues — from how to address the physical and financial well-being of employees to ways to ensure business continuity — are top of mind for companies. The COVID-19 outbreak presents various challenges, and global employers must work to evaluate them. Evaluate:
- New business travel protocols and criteria for business operation
- Shifting tax obligations
- Changes to corporate-level cost projections
- Managing immigration challenges
- Reshaping mobility policies
- Preparation for mass movement when crisis lessens
Meeting regulatory obligations
As the virus outbreak widens and economic conditions worsen, Tax organizations may experience additional resource shortages and budget constraints. Nevertheless, tax compliance requirements still need to be met.
Even if your company has historically prepared your returns in-house, you may find yourself short-handed. Consider:
- Co-sourcing or outsourcing tax compliance
- Loan staff options
Trade and customs issues
Companies must analyze multiple business, operations, and tax and tariff scenarios; understand the costs of different supply chain configurations, as well as opportunities; and make informed decisions quickly. Business leaders may have to deal with short-term customs issues, such as navigating processes to send goods into affected areas or obtaining appropriate clearances to move manufactured goods out of a country. Additionally, companies that use temporary providers to replace vendors facing constraints will likely need to monitor tariffs and other customs implications. Depending on the regions — as well as the products, types and suppliers being used — the level of import duty and/or tariff a company may have to pay could vary. Assess:
- Meeting regulatory obligations
- Duty-drawbacks
- Supply chain
- Export controls
- Sanctions
