ECONOMIC AND SOCIAL MEASURES IN THE FACE OF COVID-19
Yesterday, 18th March 2020, the Spanish government declared new provisions (Real Decreto-ley 8/2020) of 17th March, on the extraordinary urgent measures to address the economic and social impact of Covid-19, which was published in the Boletín Oficial del Estado (Official State Gazette).
These provisions are a set of measures that, in some cases, establish new protections for businesses and employees and, in other cases, simplify existing ones in order to meet the new challenge we face.
This new provision is rather long and contains detailed information on each regulation, which demands excessive and complex requirements in order to benefit from the new measures.
Below is a summary of the main changes introduced by this provision, outlining the risks of each of them.
- ARTICLE 17. EXTRAORDINARY GOVERNMENT ALLOWANCE FOR THOSE AFFECTED BY THE STATE OF ALARM
As an exception and for a limited time period of one month (from the declaration of the state of alarm or until the last day of the month in which the state of alarm ends), people who are self-employed and whose activities are suspended, or whose income in the previous month in which the government allowance requested is reduced by at least 74% in relation to the average income in previous months, will be entitled to the extraordinary government allowance for loss of business.
The amount of the allowance shall be 70% of the regulatory base.
This benefit is extended to those who work in worker-owned cooperatives who are self-employed, but it is not made clear whether self-employed members of commercial entities can apply for this benefit. We understand that they can also apply for it.
The application for this allowance, given the need to prove the loss of income, cannot be applied for with full effect until April. This application must be made through Seguridad Social (Social Security) or through the corresponding insurance companies.
- ARTICLES 22 TO 28. MEASURES TO MAKE TEMPORARY ADJUSTMENT ARRANGEMENTS MORE FLEXIBLE IN ORDER TO AVOID REDUNDANCIES
The aforementioned articles contain a regulation that makes the current regulation on Temporary Redundancy Proceedings (Expedientes de Regulación Temporal de Empleo, henceforth ERTES) more flexible, allowing for the temporary suspension of employment contracts or the temporary reduction of working hours.
Below, we highlight the main features of the new regulation:
- ERTES due to force majeure. These are those that cause a direct loss of business due to the suspension of cancellation of its activities, temporary closure of the premises that relies on public influx, public transport restrictions and the general mobility of people and/or goods, the lack of supplies that prevent normal activities from being carried out, or in urgent and extraordinary situations due to the health of the workforce or the adoption of preventative measures declared by the health authority.
In these cases, the procedure is greatly simplified as a it requires the applicant to present a letter and a supporting report to the labour authority who will deal with the necessary paperwork. This will take effect from the date of the event causing the force majeure.
Another substantial difference when dealing with a force majeure is that the company is exempt from contributing to social security and similar, however if the company has more than 50 employees, the exemption only covers 75% of the total.
The exemptions from contributions will be applied by the Tesorería General de la Seguridad Social (General Treasury of the Social Security) at the request of the employer, after identifying the workers and the period of suspension or reduction of the working day.
- ERTES due to economic, technical or organisational and production reasons. In these cases, the regulation is much more similar to the ordinary procedure. Only the constitution of the negotiating committee is simplified, and the time limits of the procedure are shortened.
- Unemployment benefits. Workers affected by the ERTES will be entitled to unemployment benefits, even if they do not have the minimum period of employment contributions that are usually required for this. In all cases, the employee must have begun to work at the company prior to 18th March 2020.
The duration of the benefit shall extend until the end of the suspension period or the period of temporary reduction of the working day to which it relates.
In these cases, the submission of applications for initial registration or renewal of unemployment benefits outside of the legally established deadlines does not imply that the duration of entitlement is reduced.
- The temporary nature of the measures. All the above measures shall remain in force as long as the extraordinary situation arising from COVID-19 continues.
- Maintenance of employment. The 6th additional provision established that the extraordinary measures in employment sector which are laid out in this document, shall be subject to a commitment by the company to maintain employment for a period of 6 months from the date of return to business. This is highly important, as failure to do so may entail serious consequences and the loss of all the benefits obtained.
- ARTICLES 29 TO 31. GUARANTEED LIQUIDITY TO SUPPORT ECONOMIC ACTIVITY
- Guarantee scheme for businesses and the self-employed
The Ministerio de Asuntos Económicos y Transformación Digital (Ministry of Economic Affairs and Digital Transformation) will grant guarantees so that companies can apply for credit from financial institutions to meet their needs arising from invoice management, working capital requirements, maturity of financial or tax obligations, and other liquidity needs.
The maximum combined amount of guarantees that the State may grant will be 100 billion euros.
However, the regulation does not specify the conditions and requirements of this line of aid, a matter that is deferred to a subsequent agreement of Consejo de Ministros (Council of Ministers), which will have to establish important issues such as the interest rate applicable by the financial institution, the maximum amount that can be requested, the repayment period or the possible requirements demanded of the applicant.
- Expansion of ICO lines of finance for companies and the self-employed.
The net borrowing limit is increased by 10 billion euros in order to provide additional liquidity to companies, especially SMEs and the self-employed, through the ICO lines of finance through the intermediation of finance institutions, in the short, medium and long term, and in accordance with its policy of direct financing for larger companies.
- ARTICLES 33. EXTENSION OF TAX DEADLINES
- The following deadlines, that have not expired by 18th March 2020, are extended until 30th April:
- The deadlines for tax debt payment provided for in Article 62 of the Spanish law 58/2003, of 17th December, on General Tributaria (general taxation). These deadlines are those which establish that tax notifications received between the 1st and 15th are due on the 20th of the following month; and those notified between the 16th and 30th are due on the 5th day of the second month thereafter.
- The expiry of the deadlines and instalments of the deferment agreements, and the instalment agreements granted.
- The deadlines related to the conduct of auctions and the award of goods.
- The deadlines for responding to summons, seizure proceedings and requests for information with tax implications, the deadlines for submitting pleadings in response to acts of initiation of this procedure or hearing, issued in tax enforcement proceedings, sanctioning or declaration of nullity, refund of undue income, rectification of material errors, and cancellation proceedings.
- In addition, the enforcement of guarantees on property will not take place until 30th April 2020.
- The same deadlines as above are extended until 20th May 2020, as communicated on 18th March 2020, unless the deadline granted by the general regulations is longer, in which case it will apply.
- The period for lodging appeals or economic-administrative claims shall not begin until 20th April 2020, or until notification has been presented.
- The deadlines for filing returns and self-assessment derived from each tax are not suspended, without affecting the possibility of requesting deferrals, in accordance with the provisions of article 14 of the Real Decreto-ley 7/2000, of 12th March (possibility of suspending VAT debt and withholdings without guarantee, up to 30,000 euros).
- Article 34. Measures in the area of public contracts to mitigate the consequences of COVID-19, by means of compensation for damages caused to the contractor if certain conditions are met.
- Article 35. Financial measures for farmers who have taken out loans as a result of the drought situation in 2017.
- Article 40. Extraordinary measures applicable to legal persons governed by private law, such as the possibility of holding meetings of collegiate bodies by videoconference and adopting resolutions in writing and without a meeting; suspension of the deadline for formulating the annual accounts until the end of the state of alarm, to be resumed for another three months from that date; or postponement of the date for holding the AGM to approve the accounts of the previous year, which must be held within three months of the end of the deadline for formulating the annual accounts.
- Article 42. Suspension of the expiry period for entries in the register, while the state of alarm is in force.
- Article 43. Modification of the deadline for filing for insolvency proceedings, so that while the state of alarm is in force, the debtor who is in a state of insolvency will not be obliged to file for insolvency proceedings until two after the end of the state of alarm.
The above are the main measures adopted by the real Decreto-Ley of 17th March 2020.
