Aid for businesses and the self-employed against COVID-19

Finally, and after a long wait, on 12 March the government approved a set of extraordinary measures to support business solvency in response to the pandemic

Just one year after the first declaration of the state of alarm, on 12 March 2021, the Council of Ministers approved a Royal Decree-Law on extraordinary measures to support business solvency, which mobilises 11 billion euros in direct aid to companies, through subsidies, cost reductions and capital reinforcement. To this end, three funds have been created to help viable companies whose situation has deteriorated as a result of the pandemic; and the validity of some measures in the area of insolvency has also been extended until the end of 2021.

1.- 7 billion line of direct aid to the self-employed and companies

A new line of direct aid for the self-employed and companies is created, endowed with 7 billion euros, for those sectors most affected by the pandemic whose income in 2020 has fallen by more than 30% compared to the previous year.

The new aid established will be earmarked and will be used to pay debts incurred by companies since March 2020, such as payments to suppliers, supplies, salaries, leases or reduction of financial debt. All companies and self-employed workers in the hotel and catering sector, the sectors with access to the extended ERTE established in Royal Decree-Law 2/2021, and others especially affected by the pandemic, such as manufacturing industry activities related to commerce and hotels and restaurants; wholesale and retail trade; sectors auxiliary to transport; aeronautical maintenance, and activities related to culture and sporting activities, will be eligible for this aid.

The aid will cover up to 40% of the additional drop in income for microenterprises and the self-employed (with up to 10 employees), and 20% for other companies, with a fixed amount of 3,000 euros for the self-employed who pay tax under the objective estimation regime and a range of between 4,000 and 200,000 euros for the rest.

2.- Aid for the restructuring of COVID financial debt

Another aid package has also been created – endowed with 3,000 million euros – to support and make loans with public guarantees more flexible, thus allowing the ICO to reincorporate itself into the refinancing and restructuring processes agreed between banks and their clients. In other words, this type of aid is aimed at:

possibility of extending the maturity of publicly guaranteed loans for an additional period (in addition to the extension of last November);
possibility to convert ICO loans into equity loans; and
possibility – as an option of last resort – to reduce ICO loans requested during the pandemic.

3.- Recapitalisation fund for medium-sized companies

Thirdly, and for cases in which the previous measures have not been sufficient, a Recapitalisation Fund is created, aimed at strengthening the balance sheets of companies that were viable in December 2019, but are facing solvency problems due to the pandemic.

This fund is endowed with €1 billion and will be managed by COFIDES, a company with public-private capital. The aid will be provided in the form of financial instruments, such as ordinary loans, equity loans, equity or others to companies experiencing temporary difficulties that are not eligible for aid from the Solvency Support Fund for Strategic Companies, managed by SEPI, which has a minimum contribution amount of ¤25 million.

Conditions for aid

The requirements to be met by all those companies that are going to receive this aid are as follows:

not be domiciled in a tax haven,
not be in insolvency proceedings or have ceased trading at the time of application,
be up to date with tax and social security payments,
not distribute dividends or increase the salaries of its management team for a period of two years,
maintain its activity until June 2022.

The processing of the aforementioned aids will be carried out through the different Autonomous Communities and the cities of Ceuta and Melilla, which will make the corresponding calls for the granting of these direct aids. They will be responsible for the entire process of processing, management and resolution of applications, payment of aid and payment controls.

Therefore, we will have to pay close attention to the different calls for applications that will be published in the coming weeks as regards the specific details of the processing of this aid in each Autonomous Community. Although it is not difficult to predict that this disparity of calls for applications will give rise to more than one problem.

Deferral of tax debts

The rest of the measures included in this Royal Decree-Law also include, in its third additional provision, the increase to four months of the deferral period for all tax returns and self-assessments whose deadline for filing and payment is from 1 April to 30 April 2021, for those companies with a volume of income in 2020 of less than 6,010,121.04 euros.

The conditions of these deferrals are as follows:

the term will be 6 months;
no late payment interest will accrue during the first four months of the deferral.