Congress has approved and Trump executed the CARES Act, a $2 trillion stimulus bill to boost the US economy, addressing the impact of the coronavirus.

The legislation authorized around $500 billion in loans and other forms of financial support to companies (with adequate oversight and labor protection provisions, a key demand from Democrats), and funding for state and local governments, in addition the bill includes $350 billions in financial assistance to small businesses, and $150 billion to hospitals and other healthcare providers.

The proposed legislation would deliver direct relief payments to $1,200 to single Americans, $2,400 for married couples, and $500 for each child under age 17. However, take note, the payments would start to phase out for individuals with adjusted gross incomes of more than $75,000, and those making more than $99,000 would not qualify at all. These thresholds double for couples. Although the government plans to expedite this payments, many experts consider unlikely that those will reach people at large around May. It is important to note that Brookings Institution has made an important preliminary assessment on the reach of direct payments in this terms:

“The IRS will use 2019 tax returns (or 2018 returns if the 2019 return is not yet available), Social Security benefit statements, and Railroad Retirement benefit statements to calculate the direct payment owed. Almost three quarters of tax filers will qualify for aid; the others will be disqualified on account of high incomes. As a result, the distribution of the direct payments is progressive.

But it bears emphasis that many low-income or otherwise vulnerable households may struggle to obtain a payment, especially people who may not have filed a 2018 or 2019 return. These include workers who earn less than the standard deduction ($12,200 for single filers in 2019, $24,400 for joint filers, and slightly more respectively for seniors) and people who earn cash income but don’t report it. Dependents over the age of 17, such as cared-for parents and disabled children, are not eligible for the direct payment, but their caretakers also will not receive a $500 benefit for them. The CARES Act also excludes tax filers without Social Security numbers (SSNs), requiring both taxpayers and their spouses to have SSNs if their payments are determined from a joint return. The choice to give payments only to households with SSNs leaves out Dreamers and families of filers with only Individual Taxpayer Identification Numbers.

The law gives the Treasury discretion to get direct payments to some of these households using certain information that the federal government can access, but it remains to be seen how fully that discretion will be deployed. Many millions of low-income or otherwise vulnerable households may need to file an informational return in order to claim the direct payment. Previous experience with direct payments in 2008 and 2009 shows that many of these households will not file.  Filing will only be harder now, when people are isolating and unable to get face-to-face help from family members or government agencies.” This is particularly relevant, first given its social justice implications, but also must be flagged to the business community and particularly to small hispanic and minority business owners, that many in their work force could be left out of relief, which must be taken into account if you want to implement a plan of solidarity with your workforce. 

Among the different sectors impacted by COVID-19, small businesses are especially vulnerable and have to get ready for what is to come. In order to help them, here is some advice for them to follow:

1) Prepare yourself to access or apply to available refinance, loans, and grants.

  • Call your accountants and prepare financial due diligence packages and review the typical SBA loan application and requirements.
  • Talk to your bank to explore options or visit online Fintech platforms to see what they would require to lend or open a line of credit for your business.
  • Remember to compare interest rates and then decide what your best alternative is, given your credit rating.

2) You must be very cautious of predatory lending proposals that will hit your inbox during these days. 

  • Review carefully any lending option, interest rates, and terms. The last thing you need in this context is to fall into unsustainable and costly loans desperately. 
  • It is also advisable to look into equity available on the company’s property. For instance, equity mortgages at this interest rate could be a good way to refinance all your liabilities or fund a strong comeback into the regular business after the crisis is over. 

3) Look into your cash flow and reserves—if any—as well as payables and receivables.

  • To figure out the prospects of your current assets and liabilities, identity prospects for renegotiating terms of your payables (money you owe) and assess the status or strength of your receivables (invoiced you have issues and outstanding). Together with that work in projecting your cash flow, and plan accordingly. 
  • Use the time to connect with suppliers and clients to show you are there, thinking of them and your business relation. 

4) Remember that your deadline to file and pay tax is postponed to July 15th, but you should make provision for the liability. It’s postponed, not condoned, therefore plan ahead and accordingly. 

5) Finally, you must look into fixed costs like rent and utilities, and explore options that are available in this context to postpone payments and design a sustainable plan to spread those payments in arrears among future payments. 

Fundamentally, this moment is a call for leadership. And every small business owner must lead. It is the time to work with your employees on options to protect their health as well as their jobs without hurting the business. Talk to your employees to see how they are doing, understand their fears and needs, explain yours, and those constraints the business is facing. Discuss options, ideas for potential new lines of business, and strategies; be confident and have a plan to share with employees, contractors, suppliers, and clients. People respond to empathy. Cost-sharing and sacrifices can be assumed when fairness is present, but mostly, when your leadership indicates that the business unit will come out stronger after the crisis.

VAT the unknown and unwelcomed guest for US companies doing business in LatAm. By Leopoldo J Martinez and Carlos Contasti*

Imagine this dialogue between the CFO and the LatAm Tax Director: ¿Did you have someone look into the income tax withholdings or Permanent Establishment issues with our LatAm advisors? … Yes but they also suggested we consider some planning for VAT! … VAT? … Yes, an unexpected visitor.
VAT is an indirect and non-accumulative tax that levies consumption of goods and services. It is imposed on the amount of value added at each stage of the production process or the supply chain, thus, an exporter of goods, a service provider or a technology company providing a license or collecting a royalty must work around VAT.
VAT is one of the most important revenue sources for LatAm governments. Therefore its compliance is strictly enforced.  Accordingly, adequate VAT planning at the pre-business stage makes a difference.
Latin America countries differ from the European Union because there are no harmonized VAT rules and procedures. Each country has its own VAT system without any integration or collaboration between them. Moreover, some countries have a very complex indirect tax system, within the country. In Brazil, which is the largest economy in the region, the equivalent to VAT tax is disaggregated and distributed among its three territorial levels.  Industrial products sales are taxed at the federal level (IPI); all other goods are the subject of state taxation (ICMS); and services are a matter of municipal taxation (ISS). In addition, there are significant differences in tax rates for ICMS and ISS among the cities and states. As a result, there is a regional and local war to tax transactions when the fiscal base is established in low rate state or city, but the customer is located in another place.
The lack of regional harmonization represents an important challenge for services exported into LatAm. For instance, most of the LatAm countries would tax all services rendered within their territories regardless of the place of use or enjoyment, or the customer’s location.  In countries, like Venezuela, all services rendered within its territory, and services rendered from abroad (imported services), when used or enjoyed in Venezuela, are subject to VAT. Argentinean Law takes the approach of establishing that services rendered and used or enjoyed abroad are exempted from VAT. The use and enjoyment of the service approach is certainly an undetermined concept, and there are many different interpretations.
Normally, an exporter without an establishment or local presence deals with reverse VAT issues. Meaning that instead of collecting the tax from his client, the same is withheld by the client, who actually pays the tax. But other issues are relevant. In some jurisdictions it must be determined whether the transactions are a service or a royalty for intellectual property, in order to determine VAT exposure. Accordingly, contractually a license can be separated from related support services to optimize VAT exposure.
One key issue is VAT registration. In most LatAm jurisdictions it is prohibited that overseas companies register for VAT, unless they have some presence in the country, such as permanent establishment. However, in most of the countries in LatAm when a foreign entity permanently or habitually supplies goods or renders services it will be mandatory to register for VAT purposes.
There are some benefits associated with VAT registration. The potential benefits are: (i) the right to recover tax credits arising from export activities, (ii) the ability to manage VAT withholdings, and (iii) utilization of tax exemptions. Registration becomes particularly relevant when the company exporting services or goods into a VAT jurisdiction, for its commercialization or for support, is contracting with local providers charging VAT for their services, since VAT is estimated offsetting debits (VAT collected) with credits (VAT paid).  Particularly relevant in LatAm –and here is a fundamental difference with the EU system– a non-domiciled company, one not registered for VAT purposes, can not file a refund of tax credit. Using this rationale, big companies tend to do business with registered companies with the objective of recovering the VAT output generated in the transactions. Also, most of the VAT regimes exempt businesses with sales below a threshold established by the law Accordingly, VAT registration could be the basis of a VAT optimization strategy. When such decision is made, then a holistic approach to dealing with VAT and Income Taxation becomes necessary.
There are some countries in LatAm that have established certain VAT withholding methods, such as Argentina, Brazil, Colombia, Mexico and Venezuela.  Withholding obligations could take place when the taxpayer sells goods or renders services to the Federal, State or Municipal government or decentralized agencies, or because the transactions are made with a “special taxpayer”, normally a taxpayer with high revenues. VAT withholdings are not only a compliance problem; they represent a cash flow problem, because the final tax liability could result in a lower amount if there are VAT credits to offset the VAT debits.
VAT credits recovery is a practice in itself, whether from export activities, from inappropriate reverse VAT charges or from excess VAT paid as a result of a withholding imposed.
Finally, VAT compliance is an important issue to take into account. First, it represents an important cost. Second, non-compliance could trigger high penalties and business closures. Once more the lack of harmonization brings a complicated and entangled system. Commonly, compliance requirements such as bookkeeping, invoicing, record retention and return fillings are all treated in different ways, with some countries not accepting electronic invoicing (or requiring special approval for such practice). Electronic return filling has become popular in LatAm, but bookkeeping is especially entwined. In most of the countries there are books required by mercantile laws and specific books for VAT purposes.
VAT can certainly be an unexpected guest for U.S. companies doing business in Latin America. And without proper planning it can become a very unwelcomed guest.
Leopoldo J Martinez ( is the Principal of LMN Consulting LLC, a consulting firm specialized in tax, regulatory and compliance in Latin America, with operations in Washington DC, Dallas, Miami, Caracas, Mexico and Panama. Carlos Contasti ( is an Associate of LMN Consulting, with his practice based in Caracas-Venezuela.