COVID-19: Tax Measures from Other Countries for Consideration

by Nazahath Ahmed


Coronavirus pandemic has constituted unprecedented challenges both socially and economically for governments worldwide. While most of the countries have executed multiple measures to safeguard the citizens and businesses from its impact, a lot has been focused on placing stringent recovery measures in terms of tax. Tax authorities globally have announced various measures ranging from tax management and administration measures, to measures defined by the type of tax affected. The parameters have been placed to focus most on easing the burden on taxpayers in meeting tax reporting and payment obligations.1 The measures are also salient to address cash-flow difficulties that often lead to employee layoffs, inability to pay suppliers or other escalating problems that can often result in closure or bankruptcy.2

Maldives Inland Revenue Authority (MIRA) has also announced its first instance of tax measures that will be adopted in lieu of COVID-19. The list includes new deadlines for filing tax returns and payments of taxes, fees and other charges. In March 2020, the MIRA also announced lenient instalment plans available to taxpayers. While these measures provide great relief to curb the difficulties faced by taxpayers, the country is yet to brief the public regarding the medium and long term measures that will be implemented to help the businesses recover from this unprecedented situation.

This article provides an overview of some of the tax measures undertaken by tax authorities globally and attempts to present a comparative analysis of these tax measures with the Maldivian tax system.

Loss carry over provisions

In a corporate tax system loss carry forward and carry-back rules serve the purpose of preventing systematic over-taxation overtime.3 Although loss carry-backs are often beneficial for businesses to overcome the impacts of adverse revenue shocks and provide means to a fast cash flow relief4, loss carry-backs are seldom allowed in most of the countries.5 In comparison, loss carry forward provisions are incorporated in almost all countries and some countries even allow losses to be carried forward indefinitely.6

In light of COVID-19, New Zealand introduced a temporary loss carry-back regime into their Income Tax Act 2007, which simply allows losses to be carried back 1 year, and receive a refund of tax paid in the previous year7, meaning that taxpayers can carry the losses from 2020 to 2019 or they can choose to carry the losses from 2021 to 2020. To attain relief under this regime, taxpayers must establish that the loss was anticipated and that the business was profitable in the previous year before the loss was anticipated.8

When it comes to loss carry forward provisions, some countries have implemented legislative measures that have brought changes to the working of loss carry forward transactions. For instance in Peru, loss carry forward period has been extended from 4 to 5 years9. More interestingly, New Zealand has announced that it will be introducing a ‘same to similar business’ test with regard to the tax loss continuity rules in the later half this year.10 This means that once this rule is in effect, businesses will be able to carry forward their losses regardless of any change in share ownership.

Currently in the Maldives, the newly enacted Income Tax Act (ITA)11 has no provisions with regard to loss carry-backs. However, loss carry forwards are recognised to be set off losses against taxable income over a 5-year period.12 It is to be noted that ITA imposes two conditions that must be satisfied in order to be applicable for loss carry forward provisions. Firstly, from the beginning of the accounting period where the loss was incurred to the end of the accounting period where the loss was deducted, the same shareholders/partners must continuously own more than 50% of the share capital of the entity (shareholder continuity test)13. Secondly, companies/partnerships are required to conduct similar businesses during that period (similar business test)14.

Hence, considering the current position of the country in terms of loss carry-over provisions, many businesses can benefit from temporary loss carry-over provisions as it would help them improve their cashflows or in the worst case scenario, maintain it from plunging. Moreover, leniencies in terms of restrictions such as the continuity of 50% ownership can be beneficial as several of the businesses will undergo structural changes during these trying times.


Determination of Residency

The concept of residency serves its main function in solving double taxation cases that arise due to double residence or as a consequence of taxation at state and source15. It is solely determined under the domestic laws of each jurisdiction, and most countries define it by the threshold of presence that is required by a taxpayer in order to be deemed a resident for tax purposes. Taking into account the border shutdowns and the travel restrictions placed both domestically and internationally as result of the current pandemic, a lot of countries have implemented temporary suspensions on determining tax residence.

In India, the Central Board of Direct Taxes has provided a criteria for determining the residency status of individuals that have visited the country before it had declared a nationwide lock down.16 As per the criteria, individuals who were unable to leave the country before 31st March 2020 and individuals who departed on an evacuation flight on or before 31st March, the period from 22nd March to 31st March will not be taken into account. As for individuals who have been quarantined in the country, the period of stay from the beginning of quarantine to the date of departure or 31st March 2020 will not count.

In Singapore, where the tax residency of a company is determined by the place in which the business is controlled and managed, the Inland Revenue Authority of Singapore (IRAS) has announced17 that companies who were unable hold its board meetings in Singapore will be considered tax residents subject to the conditions: (a) the company should be a tax resident for the year 2020; and (b) there are no changes to the economic circumstances (principle activities, business model, nature of business operations and conduct of the business) of the company; and (c) the directors have to attend the board meetings held outside Singapore or if the meeting is held via electronic means due the directors being unable to travel due to COVID-19. Similarly, the status of non-resident companies in 2020 will remain unchanged if they can support the claim that board meetings were held in Singapore due to travel restrictions and that there are no changes to the economic circumstances of the company.

In the Maldives, for the determination of residency of individuals, the law prescribes that residency is timed from the day they have a permanent place of abode in the Maldives or when they have been present in the Maldives for a period of 183 days in a tax year.18 As for companies, it is considered a resident if it is: (a) incorporated in the Maldives; or (b) has a head office in the Maldives; or (c) has its central management and control in the Maldives.19

Since ours is a residence-based tax system, where those who fit the tax resident criteria pay taxes on their worldwide income20, determination of residency is as relevant in the Maldives as any other country. With the travel restrictions that the government has imposed and no ideal signs of the current COVID-19 situation stabilising in the country, the tax authority may have to deal with a hype in cases where individuals surpass the 183 days period or where it can be deemed that an otherwise non-resident company has its central management and control in the Maldives. This would eventually create a double taxation scenario that could prove detrimental since they would have to declare tax from their worldwide income because of the unfortunate consequences of COVID-19. Thus, temporary changes to the residency determination criteria would prove to be rather beneficial.


Permanent Establishment determination

The OECD model convention defines permanent establishment (PE) as a fixed place of business through which the business through which the business of an enterprise is wholly or partly carried. The purpose of PE determination is to establish if an enterprise that carries on business in another state can be taxed on the profits earned in that state.21

In Singapore, IRAS has clarified that unplanned presence of employees of a foreign company due to COVID-19 will be disregarded in determining PE status, given that (a) the company does not have a PE in Singapore in the year 2020; and (b) there are no changes to the economic circumstances (principle activities, business model, nature of business operations and conduct of the business) of the company; and (c) the unplanned presence is temporary and due to travel restrictions; and (d) the activities performed by the employees would not have been performed in Singapore if not for the travel restrictions.22

Currently in the Maldives, the definition of PE in ITA is heavily inspired from the OECD model convention. ITA defines it as a fixed place of business through which the business of an enterprise is wholly and partly carried on.23 It is said to include a place of management, a branch, an office, a factory, a workshop etc. The ITA further stipulates that PE also encompasses either a building site, a construction, assembly or installation project or supervisory activities in connection with these sites and projects given that they last more than 6 (six) months.24 Further, furnishing of services by an enterprise through employees or other personnel are considered PE’s if the activities continue for more than 183 days in a tax year.25

Given the already existing predictable delays that are usually caused in construction and furnishing service projects, and adding to it the hindrances that will be caused by the COVID-19 situation, it would be highly unfair for such activities to gain the status of PE and to be subjected to tax from their source income. Therefore, adoption of temporary rules for determining PE status will most likely prevent such an occurrence. 


Revision of Capital Allowance rates

In layman terms, depreciation can be defined as a method of recognising the costs arising from wear and tear of fixed assets by spreading that cost over the useful life.26 Capital allowance or tax allowance being the tax deductible version of depreciation, it plays a vital role in the sense that they can have a crucial effect on net income, thereby impacting tax computations, investments, dividends, financial ratios, etc.27 Although depreciation is one of the many deductions used in determining taxable income, its value can be measured in terms of its ability to lift the current cashflow of a business.

Thus, it is understandable that some countries are looking to revise the effective depreciation rates. In Peru, as a measure in response to the COVID-19 situation, depreciation percentage for machinery and equipment has changed from 10% to 20% for the assets acquired in 2020 and 2021.28 In a likewise approach, the Kenyan government increased depreciation rates of assets such as hospital equipment from 12% to 50%.29

In the Maldives, the Income Tax Regulation30, which lays down the provisions regarding the capital allowance of assets stipulates the rates for the classes of assets that qualify for capital allowance. For example the rate for buildings is 4%, plant and equipment is 10% and for computer software it’s 33 ½ %. It is to be noted that in order to claim capital allowances, the asset must be used for more than 183 days in that accounting period.32

Nonetheless to say, revised capital allowance rates will help the businesses with their cash flow.


Final thoughts

As countries are relentlessly battling to reduce the impacts of the current pandemic, most countries have been quick to adapt and adopt measures to ease the tax burden. From suspension of residency and PE determination to changes to tax rates, capital allowance rates to brand new provisions such as loss carry over provisions – a lot of which are directed at keeping businesses afloat rather than strategising in terms of the economic benefit. The current situation in the Maldives desperately calls for such measures that will help a lot of businesses and also, the uncertainty surrounding the residency and PE determination. Although a lot can be argued against it, in lieu of how fragile our economy is and how the newly implemented income tax regime is not ready to undergo many changes, I believe that the current situation calls for a little more than just extended deadlines.


CIAT/IOTA/OECD (2020), Tax Administration Responses to COVID-19: Measures Taken to Support Taxpayers, OECD, Paris.
Tax Policy. (n.d.). Retrieved from
Hanappi, T. (2018, February 22). Loss carryover provisions: Measuring effects on tax symmetry and automatic stabilization. Retrieved from
Canada, France, Germany, Ireland, the Netherlands, Singapore, the United Kingdom and the United States allow carry-backs for between 1 and 3 years.
South Africa, Norway, Germany, Italy, Ukraine and Sweden are amongst countries that allow losses to be carried forward without time limitation, subject to certain conditions.
COVID-19 Response (Taxation and Other Regulatory Urgent Measures) Act 2020, New Zealand.
Legislative Decree 148. (n.d.). Retrieved from
10 Changes to the tax loss continuity rules. (n.d.). Retrieved from
11 Income Tax Act (Law Number 25/2019).
12 Section 33(a) & (c), ITA.
13 Section 33(e)(1) & (2), ITA.
14 Section 33(e)(1) & (2), ITA.
15 OECD (2017), Model Tax Convention on Income and on Capital: Condensed Version 2017, OECD Publishing, Paris.
16 Circular 11 of 2020, Central Board of Direct Taxes, India.
17 COVID-19-Support-Measures-and-Tax-Guidance. (n.d.). Retrieved from
18 Section 81(a), ITA. 
19 Section 81(b), ITA.
20 Section 10(a) & (b), ITA.
21 OECD (2017), Model Tax Convention on Income and on Capital: Condensed Version 2017, OECD Publishing, Paris.
22 COVID-19-Support-Measures-and-Tax-Guidance. (n.d.). Retrieved from
23 Section 79(gg)(1), ITA.
24 Section 79(gg)(3)(i), ITA.
25 Section 79(gg)(3)(ii), ITA.
26 Slitor, R. (1962). FEDERAL TAX TREATMENT OF DEPRECIATION AND OBSOLESCENCE. Proceedings of the Annual Conference on Taxation under the Auspices of the National Tax Association, 55, 381-396.
27 Ben-Shahar, D., Margalioth, Y., & Sulganik, E. (2009). The Straight-Line Depreciation is Wanted, Dead or Alive. The Journal of Real Estate Research, 31(3), 351-370.
28 Legislative Decree 1488, Peru.
29 Tax Laws (Amendment) Act 2020, Kenya.
30 Income Tax Regulation (Regulation Number 2020/R-21).
31 Section 83, Income Tax Regulation.
32 Ibid.