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State aid to business due to covid-19 /03.12.2020./

To restrict the spread of COVID-19 in Latvia, from 9 November 2020 to 11 January 2021, emergency situation has been announced in Latvia and strict restrictions have been passed.
Detailed information on restrictions is available here: https://www.mk.gov.lv/lv/content/covid-19 
On 5 June 2020, the Saeima (Parliament) passed the Law on the Suppression of Consequences of the Spread of COVID-19 Infection that became effective as of 10 June 2020.
This summary provides updated information on the state support to entrepreneurs currently available in Latvia.

The state support measures available to the enterprises have been stipulated in the Law on the Suppression of Consequences of the Spread of COVID-19 Infection and the laws and regulations issued based on the above law.

The purpose of the legal framework is to restore general legal conditions after the end of the term of the emergency situation, providing a set of measures to suppress the spread of COVID-19 infection and special support mechanisms and expenses directly related to the suppression of the spread of COVID-19 to ensure improvement of the general economic situation and facilitate the stability of the national economy.
TYPE OF SUPPORT DESCRIPTION
Support to industries affected by the crisis
Extension of tax payment deadline The Law on the Suppression of Consequences of the Spread of COVID-19 Infection stipulates that taxpayers affected by the crisis caused by COVID-19, are entitled to apply for extension of tax payment deadline until 30 December 2020 (it is planned to extend this term until 30 June 2021), as well as to ask to provide extension of tax payment deadline to those delayed tax payments the payment term of which has been extended pursuant to the Law on Taxes and Duties, if the delay was caused due to the spread of COVID-19.

To be entitled for extension, the taxpayer has to submit a justified application to the State Revenue Service (hereinafter — SRS). Submission term is 15 days after the payment is due or after the law becomes effective.

Tax administration is entitled to perform the following in regard to delayed tax payments:

-       to divide the period; or

-       to postpone for the period up to three years from the date of submission of application.

The delay fine for the delayed tax payment to which tax payment deadline extension is applied is not calculated.
State and municipal authorities release or reduce lease payment   State and municipal authorities, as well as capital companies, for the period of the law, release the merchants operating in the industries affected by the crisis from lease payment or reduce the lease payment. Moreover, in the event of delayed payment, it is allowed no to apply delay interest and contractual penalty, except for the payment for used services, including electricity, heating, water supply and other property management services.

Those merchants that comply with the criteria set by the respective municipality are entitled to qualify for the reduction or release from the lease payment.

Currently, the release from the lease payment stipulated in the Law on the Suppression of Consequences of the Spread of COVID-19 Infection is provided until 31 December 2020, along with the passed amendments to the Law, the release period from the lease payment will be extended to 30 June 2021.
Support measures to employers, self-employed persons and patent fee payers
Idle time support to employers Employers whose revenues from operating activities for the respective month, compared to average revenues in August, September and October 2020, have decreased by at least 20%, are entitled to apply for the idle time support.

Idle time benefit will be paid in the amount of 70% of the declared average gross remuneration of an employee for the period 1 August 2020 to 30 October 2020, or of the average gross remuneration for declared months after 1 August 2020 when an employee actually worked for the respective employer.

Employees of the micro-enterprise taxpayers will be paid idle time benefit in the amount of 50% of the monthly average gross remuneration at the micro-enterprise for the third quarter of 2020.

The amount of idle time benefit per one employee cannot be less than 330 euros and not more than 1,000 euros per calendar month.

The employer is entitled to pay the difference between the idle time benefit and remuneration.

The employee who has received support for idle time is paid a bonus of 50 euros per each depended child up to the age of 24 for whom the employee is provided a personal income tax relief.

Idle time benefit is provided from 9 November 2020 to 9 January 2021.

Idle time benefit is administered and paid by the SRS.
Idle time support to self-employed persons and patent fee payers Self-employed persons and patent fee payers whose revenues from operating activities in the respective support month of 2020, compared to average revenues in August, September and October 2020, have decreased by at least 20%, are entitled to apply for the idle time support.

Idle time support for self-employed person in general tax payment regime and receiver of royalties who has not registered as the person conducting economic activity is provided in the amount of 70% of the average revenues from operating activities or royalties of the respective person (except for the royalties received by the authors and performers received from the organisations managing royalties and related rights collectively) for the third quarter of 2020, but not less than 330 euros and not more than 1,000 euros per calendar month.

Idle time support to self-employed person who pays micro-enterprise tax is determined in the amount of 50% of the micro-enterprise taxpayer’s average monthly revenues from operating activities for the third quarter of 2020, but not less than 330 euros and not more than 1,000 euros per calendar month.

The amount of support for idle patent fee payer is 400 euros if the person has effective patent in the support period and if the patent was issued at least six months prior the declaration of the emergency situation.

State support to self-employed persons and patent fee payers is administered and paid by the SRS.

The self-employed person and patent fee payer who has received support for idle time is paid a bonus of 50 euros per each depended child up to the age of 24 for whom the employee is provided a personal income tax relief.
Support to salary subsidy Salary subsidies are to provide support to compensate remuneration of those who do not work full time.

Employers whose revenues from operating activities for the respective month in 2020, compared to average revenues in August, September and October 2020, when the enterprise was operating, have decreased by at least 20 %, are entitled to apply for the support to salary subsidy.

Support to salary subsidy will be available to the entrepreneurs in the amount of 50% of the declared monthly gross remuneration for period 1 August 2020 to 31 October 2020, but not more than 500 euros per calendar month per employee.

The employer is obliged to pay the difference between the amount of the benefit and remuneration.

The support is available for the period 9 November 2020 to 9 January 2021.
Support to ensure the current asset flow Taxpayers registered with the SRS, enterprises that comply with the definition of the micro, small and medium enterprise, as well as large enterprises are entitled to apply for the support to ensure the current asset flow.

An enterprise whose turnover has decreased by at least 20% over the support period, compared to the average turnover in August, September and October 2020 in total, is entitled to apply for the support.

The support is provided in the amount of 30% of the total gross salary at the enterprise for which the employment taxes were paid in August, September and October 2020, but not more than 50,000 euros and not more than 800,000 euros for a group of related persons.

The support is available for the period 1 November 2020 to 31 December 2020. The support is provided once for entire support period.
One-time sick leave benefit The following persons with social insurance are entitled to receive one-time sick leave benefit for 14 calendar days:

1) One parent of a child, one of the adopters to whose care and supervision the child to be adopted after the adoption is confirmed by the family court is transferred, member of foster family who has signed a contract with the municipality, guardian or another person who, pursuant to the decision of family court, in fact takes care and educates the child, if this person cannot work remotely and the child in care is from the age of 10 (including) or a child with disability up to the age of 18, and if the child, due to circumstances caused by COVID-19 infection, cannot attend preschool educational establishment or studies in general education programme are organised remotely;

2) Person who is support person of a person with disability from the age of 18, to whom the municipality has provided day care centre or day centre service and who, due to circumstances caused by COVID-19 infection, cannot attend day care centre or day centre.

The one-time sick leave benefit for 14 calendar days can be received once in every period below:

-       From 30 November 2020 to 31 December 2020; and

-       From 1 January 2021 to 30 June 2021.

Sick leave benefit is paid in the amount of 60% of the person’s average salary for which social contributions have been made.

One-time sick leave benefit is requested to the State Social Insurance Agency and Personal income tax is not applied to this benefit and social insurance mandatory contributions are not made.
Payment of certificates of incapacity for work To reduce the spread of COVID-19 in work places and to help employers whose employees suffer from COVID-19 or are in quarantine from 16 November 2020 to 30 June 2021, the state provides and pays sick leave benefit starting from the first day of incapacity for work. In this case medical certificate B is issued.  

The state provides sick leave for the first three days also if from 16 November 2020 to 30 June 2021 the employee has been issued certificate of incapacity for work due to acute infection of upper respiratory tract. During the three days, the employee has to take COVID-19 test and, if the test is positive, the state continues paying sick leave benefit. If, in turn, the COVID-19 test is negative, the employee is issued medical certificate A and the employer pays sick leave benefit starting the fourth day of sickness, but not longer than for 10 calendar days.

The amount of the sick leave benefit is in the amount of 80% the average salary for which social contributions have been made.
Support measures in the tax administration sphere
Personal Income Tax The performers of economic activity are entitled not to make the applied Personal Income Tax advance payments from the revenues from economic activity for 2020. It is planned to determine that advance payments will not be applied for 2021, too.
Value Added Tax Pursuant to the Law on the Suppression of Consequences of the Spread of COVID-19 Infection, Value Added Tax (hereinafter — VAT) overpaid from 1 April to 31 December 2020, will be repaid within a shorter period rather than provided in the VAT Law.

As of 1 January 2021, amendments to the VAT Law will become effective, pursuant to which VAT repayment in a shorter period than currently provided by the VAT Law will be stipulated. VAT will be repaid in 30 days after the term provided for submission of VAT declaration.
Enterprise Income Tax Expenses related to operating activities of an Enterprise Income Tax payer (from 9 November 2020 to 31 December 2020) are goods and services presented as gifts to social groups negatively affected by the emergency situation (without personalising the receiver for the purposes of receipt of Personal Income Tax), as well as to persons whose basic operating activity is provision of medical services, education, charity, assistance to low-income persons, persons with disability or children, if the following conditions are met:

-       The receiver of the gift is not related to the taxpayer;

-       Information on the gift is publicly available;

-       Information on the receiver of the gift and support amount is submitted to the SRS along with the declaration of the last month of the reporting year.

Enterprise Income Tax payer who has made donations to reduce the consequences of the spread of COVID-19 (from 9 November 2020 to 31 December 2020), in line with the Law on Enterprise Income Tax, is entitled to increase the amount of donations that is not included taxable base of Enterprise Income Tax by three per cent of the profit for the previous reporting year after taxes.

The planned amendments to the Law on the Suppression of Consequences of the Spread of COVID-19 Infection provide that this rule will be applied until the Law will become ineffective.  
In-depth cooperation programme In 2020, 2021, 2022 and 2023, the State Revenue Service is entitled not to pass a negative decision in regard to the members of in-depth cooperation if they have been impacted by the COVID-19 crisis and the member of in-depth cooperation programme provides evidence of circumstances.
Excise Tax It is allowed to sell alcoholic beverages on the basis of distance contract. It is prohibited to sell alcoholic beverages to persons younger than the age of 18 and from 10.00 P.M. to 8. 00 A.M.
Immovable Property Tax In 2020, municipalities are entitled to determine Immovable Property Tax payment terms that differ from those stipulated in the Law On Immovable Property Tax, transferring it to a later term in 2020. The municipality can exercise these rights by taking a decision that applies to all taxpayers or providing separate categories of taxpayers. The municipalities have to inform the taxpayers on their decisions.

The planned amendments to the Law on the Suppression of Consequences of the Spread of COVID-19 Infection provide that in 2021 the municipalities will have rights to change the payment term for Immovable Property Tax.  
Support provided by the State Development Finance Institution “Altum” / COVID-19
Working capital loan / COVID-19 Working capital loan is liquidity support for businesses, whose activities have been affected by Covid-19.

The amount of support is up to 1 million euro, but total amount of the loan cannot exceed at least one of the criteria:

-       25% of the entrepreneurs turnover in 2019;

-       loan amount must not exceed twice the total remuneration of employees (incl. social contributions) in 2019 (for those established in 2019, planned two-year amount)  

-       the necessary liquidity amount to ensure operating activity for the next 12 months.
Support to exporters / COVID-19 Until 31 December 2020, restrictions on export guarantees have been cancelled to the European Union Member States and some OECD Member States.

In future, large enterprises* also can apply for export guarantees to developed countries, regardless of the export turnover and state to which transactions are planned, without additional restrictions.

The maximum amount of liabilities for losses incurred due to one foreign customer is 2 million euro.
Guarantees to large companies* /
COVID-19
The following large companies* are able to qualify for support:

-       export in the previous two years reached at least 30% of turnover;

-       planned export in the coming two years is at least 50% of turnover, if the company’s operations are moved to Latvia from a territory outside EEA, or the company has started operations in Latvia;

-       company applying for the support are able to prove negative COVID-19 impact.

The amount of guarantee is up to 25% of the company’s turnover in 2019:

-       for new enterprises: up to 15 million euro;

-       for existing companies – the minimum financial service balance for deferred principal amount is 10 million euro, while the maximum guarantee is 15 million euro.

The goal of the loan granted by the bank to which the guarantee is applied, is:

-       investment loan;

-       loan for financing the current assets, including credit limits (credit lines and overdrafts);

-       financial leasing, limits of financial leasing.
Loan holidays guarantee /
COVID-19
The enterprises who have faced objective difficulties to make loan payments to banks due to the spread of COVID-19, are offered to apply for the loan guarantees that allow to have a deferred payment of loan principal payment to the bank.

Small, medium-sized** and large enterprises* can apply for the guarantee.

The amount of the financial service covered by the guarantee shall not exceed 25% of the business’ total turnover in 2019, but the maximum amount of the guarantee shall not exceed 5 million euro.
Investment fund / COVID-19 Financing is available to large enterprises* whose operations are affected negatively by COVID-19, as well as those large enterprises that would like to transform their current commercial activity model in line with the current business and life challenges.

Supported types of investments or combination of these types of investments to solve the enterprise’s financial needs:

-       investment in companies’ capital;

-       quasi-equity investments (including mezzanine and convertible loans);

Investments in listed bonds (including convertible bonds)Investment amount per one company is up to 10 million euro.
Loans to large and medium-sized enterprises /
COVID-19
For maintaining and increasing exports and competitiveness, as well as for implementation of viable projects

.

-       for long-term tangible and intangible investments with a loan from a credit institution, leasing company or other financial institution;

-       the loan will be subordinated to another lender’s loan with lower collateral; up to 15 million euro and not more than the loan issued by another institution;

-       loan maturity up to 20 years, not exceeding the useful life and amortization period of the assets to be acquired.
* Enterprise is qualified as a large company, if at least one of the following criteria applies:

-       More than 250 employees are employed by the enterprise; or

-       The consolidated turnover of the enterprise/group exceeds 50 million euro;

-       The consolidated balance sheet value of the enterprise is more than 43 million euro.

** Small enterprises are enterprises that employ less than 50 employees and whose annual turnover or annual balance sheet value does not exceed 10 million euro. Medium-sized enterprises are defined as enterprises that employ less than 250 employees and whose annual turnover does not exceed 50 million euro or annual balance sheet value does not exceed 43 million euro, assessing the performance of the company individually and / or the group of companies.

The conditions for granting each specific financial support instrument of the State Development Financial Institution “Altum”, the amount of the loan, repayment terms and other conditions shall be determined taking into account the specifics of the industry in which the company operates and evaluating other aspects.

03.12.20


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

Lija Vītoliņa

Deputy Managing Director

Mobile: +371 26 516 250

Email: lija.vitolina@leinonen.lv

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