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State aid to entrepreneurs due to COVID19

On March 20th, 2020, Saeima adopted the law “On measures for the prevention and management of national threats and their effects in relation to the spread of Covid-19” effective starting from March 22nd, 2020.

The purpose of the Law is to identify measures for the prevention and management of threats to the State and its consequences, special support mechanisms, as well as expenditure directly related to the limitation of the distribution of Covid-19. Below, we have summarized the types of state aid available.

The list of the sectors affected by the crisis will be approved by Cabinet regulations and the government's list of the sectors may be revised and changed, depending on the situation in the country.
 

OBJECTIVE

MEASURES

Support for industries affected by Covid-19

Extension of tax payment

The taxpayers of the affected industries are entitled to apply for extension of tax payment deadline. Moreover, the taxpayers, who have been already provided an extension for delayed tax payments pursuant to the Law On Taxes and Duties, can apply for extension provided that the delay was caused by Covid-19.

To be entitled for extension, the taxpayer has to submit an application. Submission term is within two months 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 fine for the delayed tax payment to which tax payment deadline extension is applied is not calculated.

State support for payroll payment

Idle time benefit is provided to the employees of industries affected by the crisis who are not employed or are in idle time.

Amount of idle time benefit: 75% of the average 6 months earnings of the employee, but not more than 700 euros per calendar month.

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

The payment of an idle allowance shall be suspended if the employer recruits new employees at the time of receipt thereof.

Cabinet may prescribe other aid measures to industries affected by the crisis.

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.

Support measures regardless of industry

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.

Value added tax

Value Added Tax overpaid from 1 April to 31 December 2020, will be repaid within a shorter period rather than provided in the VAT Law. Thereby providing financial resources to overcome the crisis caused by Covid-19.

In-depth Cooperation program

In 2020, 2021, 2022 and 2023, the State Revenue Service is entitled not to adopt 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.

Period for submission of annual financial statements and consolidated financial statements is extended

The deadline for submitting the 2019 annual accounts (3 or 4 months, respectively) has been extended for entities subject to the Law on the Annual Financial Statements and Consolidated Financial Statements, as well as for associations, foundations and religious organisations.

Excise tax

It is permitted to sell excise goods via distance contract, except for tobacco products and liquids in the electronic cigarettes. The sales prohibition remains the same from 10.00 p.m. to 8.00 a.m.

Excise tax is released for undenatured alcohol used to produce alcohol containing disinfectants, if purchase or production of undenatured alcohol is significantly burdened or is impossible due to Covid-19. In this case, in the circulation of alcohol, the law stipulating the procedure how excise tax release is applied to alcoholic beverages is complied with. Purchase of alcohol requires a permit of the State Revenue Service to purchase alcoholic beverages.

Excise tax security reduction:

-       Up to 90% for merchants with a special permit (licence) approved for operations of warehouse holder and those engaged in production of alcohol. These merchants have to inform the State Revenue Service via electronic declaration system about the beginning of alcohol production at least one working days before the process is started.

-       100%, if the producer of disinfectant, based on the permit to purchase alcoholic beverages issued by the State Revenue Service, would import or receive alcohol from another member state.

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 State Development Finance Institution ALTUM provides support mechanisms to companies, including loan guarantees and loans for critical solutions.

Guarantee provisions (in a programme, for risk coverage per each 10 to 15 million euros, support of approximately 100 million euros can be provided):

1)   Supported company: small and medium-sized companies, large companies;

2)   Company has not faced any financial difficulties before Covid-19 crisis;

3)   Guarantee amount up to 50%;

4)   Maximum amount of guarantee up to 5 million euros for one company;

5)   Maximum term of guarantee is up to 2 years;

6)   Guarantee is issued for existing liabilities (investment loans, finance lease), and credit institution postpones repayment of principal amount for a period up to two years;

7)   Guarantee can be issued for the loan of current assets for a period up to three years (with company taking up new liabilities and restructuring existing loan of current assets issued by the credit institution).

Loan provisions for critical solution (in a programme, for risk coverage per each 25 million euros, support of approximately 100 million euros can be provided):

1)   Supported company: small and medium-sized companies, large companies;

2)   Company has not faced any financial difficulties before Covid-19 crisis;

3)   Loan to finance new current assets;

4)   Maximum amount of up to 1 million euros for one company;

5)   Maximum repayment term up to 3 years;

6)   Grace period applied to principal amount up to 12 months;

7)   Significantly reduced security requirements;

8)   Reduced/subsidised interest rate.


23.03.20


Author:   

Inga Jomanta

Senior Tax Advisor

Mobile: +37123995382

Email: inga.jomanta(at)leinonen.lv

Līga Treilone

Senior Tax Advisor

Mobile: +37123995387

Email: liga.treilone(at)leinonen.lv

Antons Zagdajs

Legal Advisor

Mobile: +37124229113

Email: antons.zagdajs(at)leinonen.lv

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