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Idle time benefits due to COVID19

On 24 March 2020, the Cabinet of Ministers adopted Regulations On Idle Time Benefits to Employees affected by the Spread of Covid-19 (hereinafter — “Regulations”).

The Regulations stipulate the amount and procedure how the idle time benefit is provided to employees working in industries in which the financial condition has worsened due to the spread of Covid-19.

The Cabinet of Ministers on the March 26th, 2020 adopted amendments to the list of industries in which the financial condition has worsened due to the spread of Covid-19. The Cabinet of Ministers specified that any crisis affected company meeting certain criterias in entitled to apply for idle time benefit.

What is idle time benefit?
Idle time benefit is a benefit paid out in the event the employer does not provide work to an employee or does not perform the activities necessary for the acceptance of employee’s obligations during idle period due to the spread of Covid-19.

What is idle time period?
Idle time period is a period from 14 March to 14 May 2020 but not longer than the decision of the Cabinet of Ministers on emergency situation remains in force.

Who is the employer – the crisis-affected company?
The crisis-affected companies may apply for an idle benefit and for the distribution or deferral of late tax payments for a period of up to three years if company’s revenue from economic activity decreased by at least 30 per cent in March or April 2020 compared to the relevant month of 2019, due to the distribution of Covid-19.

The crisis-affected companies may apply for an idle benefit and for the distribution or deferral of late tax payments for a period of up to three years if company’s revenue from economic activity in March or April 2020, compared to the relevant month of 2019, has decreased by 20 per cent due to the distribution of Covid-19, provided that company meets at least one of the following criteria:

  • the company's exports in 2019 represent 10% of its total turnover or is not less than EUR 500 000.
  • the average monthly gross salary paid by the company in 2019 is not less than EUR 800.
  • the long-term investments in fixed assets on 31 December 2019 is at least EUR 500 000

What to do to receive idle time benefit?

The validity of application for idle time benefit is assessed and paid out by the State Revenue Service.

To apply for the benefit, employer has to submit idle time benefit application with the Electronic Declaration System until 25 April 2020. The application has to be submitted for the period from 14 March to 31 March 2020 and further on until the 25th day of every month.

The application for idle time benefit has to include the following information:

  • Details and primary line of business of employer as at 14 March 2020;
  • Idle time period;
  • Basis for the idle time of an employee due to conditions that, as a result of crisis, were caused by the employer;
  • Information about the employee in idle time (personal data, idle time period of employee and account to which idle time benefit is payable);
  • Confirmation that the employee for whom the idle time benefit is requested is not in temporary disability and in a month after submission of the application the employee will not be released as a result of employer’s initiative.

What is the amount of idle time benefit?

The amount of idle time benefit is determined based on the data provided by the employer to the State Revenue Service. The amount of idle time benefit is 75% of the average gross monthly remuneration of employee over the previous six–month period before declaration of emergency situation or based on the actual data submitted about the employee over the previous six months, but not more than 700 euros per calendar month.

Idle time benefit is provided and paid out based on the idle time period provided by the employer in the application.

How long after submission of the application the employee can receive the idle time benefit?
The State Revenue Service pays out the requested idle time benefit for one calendar month within five days after receipt of the application.

What happens in case the employee is employed by several employers?
If an employee is employed by several employers, idle time benefit is provided considering which is the main place of generating income (where the salary tax booklet has been submitted). If the salary tax booklet has not been submitted to any employer, idle time benefit is paid to such employee considering which employer submitted the application first.

When can the State Revenue Service refuse to provide idle time benefit?
The State Revenue Service does not provide idle time benefit:

  • If the employer, over the previous 12–month period before the emergency situation did not comply with the regulations for submission of statements and reports and as at 7 March 2020 the employer has tax liabilities;
  • If the employer is excluded or over the last two years had been excluded from the register of VAT payers of the State Revenue Service, or the economic activities of the employer had been suspended;
  • If, as at the date of decision, the employer has on-going insolvency proceedings;
  • If, over the previous six–month period before declaration of emergency situation, the employer has calculated average monthly taxes administered by the State Revenue Service that do not exceed 200 euros;
  • If, as at 1 March 2020, the employer’s primary line of business does not comply with the line of business notified to the State Revenue Service;
  • If the employer has not submitted justification of idle time of an employee due to conditions that, as a result of crisis, were caused by the employer; of after assessment of the employer’s application it was concluded that the employee’s idle time was not related to the conditions caused by the crisis;
  • If an employee started his/her employment legal relationship after March 1st,  2020;
  • If the benefit was requested for the employer’s Board and Council members;
  • If the benefit was requested for calendar days for which sick leave benefit was provided;
  • To employees who are simultaneously employed at the state or municipality institution or capital company, receive retirement, term of service or disability pension or conduct economic activities;
  • If the benefit was requested for the employees employed at institutions financed from the state and municipality and merchants controlled by them;
  • If the benefit was requested for the employer whose staff has been leased to another taxpayer;
  • If, over the previous three years and as at the date of assessment of application, as a result of tax audit or data compliance the employer has been determined additional amounts payable to the state budget or the amount of tax repayable from the state budget has been reduced without a reason, including delay moneys and fines the total amount of which exceeds three per cent of the employer’s tax income administered by the State Revenue Service in the respective year;
  • If, in the previous year and as at the date of assessment of application, the employer or its Board Member has been punished for a violation related to employer’s tax liabilities, violations in the customs field or violation of regulations governing employment legal relations.

What else should be considered?

The State Revenue Service does not recalculate the amount of benefit paid out, if the employer submits specified data about the employee’s income during the period that is used to calculate the idle time benefit after the idle time benefit has been paid out.

Personal Income Tax and mandatory state social security contributions are not applied to the idle time benefit.

If the idle time benefit has been requested or received without justification or the employer, during the payout of idle time benefit, employs new employees or stops idle time due to restoration of operations, the employer is obliged to repay the paid out idle time benefit voluntarily.

Over the period when idle time benefit is paid out to the employee, sick leave benefit is not paid.

27.03.20


Author:   

Inga Jomanta

Senior Tax Advisor

Mobile: +37123995382

Email: inga.jomanta(at)leinonen.lv

Antons Zagdajs

Legal Advisor

Mobile: +37124229113

Email: antons.zagdajs(at)leinonen.lv

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