COVID-19: Guidelines on Subsidy for Fixed Costs published

On 25 May 2020, the Austrian Ministry of Finance published the guidelines on the fixed cost subsidy as part of the Corona Support Fund. The following update provides an overview of eligibility criteria and the application procedure from 20 May 2020.

This article, originally published on 15 May, has been updated and represents the information available to us on 2 June 2020.

• Companies which fulfil the following criteria cumulatively are eligible to apply:
  • • Legal seat or permanent establishment in Austria
    • Significant operational activity in Austria, which leads to income in accordance with Secs. 21 – 23 Austrian Income Tax Act (EStG)
    • In the previous 3 assessed years, the company was not subject to a ban on deduction in accordance with Sec. 12 para 1 subpara 10 Austrian Corporate Income Tax Act (KStG) (no aggressive tax planning)
    • In the 5 years prior to application, the company was not subject to any legally binding penalty under tax criminal law (with the exception of financial irregularities) or a corresponding fine for a corporate crime committed with intent.
    • As at 31 December 2019, the company was not experiencing difficulties due to the general EU Block Exemption Regulation, the company was not involved in insolvency proceedings at the time of application, nor had the company fulfilled the requirements under national law for opening insolvency proceedings at the request of its creditors. In this case, a fixed cost subsidy based on Commission Regulation (EU) No 1407/2013 of 18 December 2013 (De-minimis Regulation) can be granted. The total amount of de-minimis aid to a company or companies within the same group in the last three tax years or financial years may not exceed EUR 200,000.
    • The COVID-19 pandemic has caused a revenue shortfall
    • Appropriate measures have been implemented to reduce the fixed costs to be covered by the subsidy (obligation to limit damages from an ‘ex-ante’ perspective
• The following companies are not eligible to apply:
  • • Supervised entities in the financial sector, particularly credit institutions under the Austrian Banking Act (BWG), insurance companies under the Austrian Insurance Supervision Act (VAG), investment firms and service providers under the Austrian Securities Supervision Act (WAG), pension providers under the Austrian Pension Providers Act (PKG), and non-profit organisations
    • Organisations under the sole ownership (direct or indirect) of regional or local authorities and other organisations governed by public law
    • Organisations under majority ownership (direct or indirect) of regional or local authorities and other organisations governed by public law, which have an equity ratio of less than 75%
    • Companies which employed more than 250 employees (full-time equivalent) as at 31 December 2019, and which have made more than 3% of staff redundant in the observation period, instead of using short-time working
    • If payments are received from the Non-Profit Organisations Support Fund
    • Newly established companies, which did not generate revenues before 16 March 2020
• Fixed costs only include expenses from operational activities in Austria, which were incurred in the period 16 March 2020 to 15 September 2020, and which fulfil one or more of the criteria listed in the guidelines. The costs of insurance coverage for the fixed costs must be deducted from the fixed costs.
• When calculating revenue shortfalls, reference should be made to the revenues from goods or services of relevance for the assessment of income tax or corporate income tax. This must include a comparison of values from Q2 2020 with those from Q2 2019.
• Alternatively, in deviation from the comparison of quarters, a maximum of three consecutive periods may be selected in the period 16 March 2020 to 15 September 2020, with a comparison made with the equivalent periods in the previous year.
• The subsidy for fixed costs is granted at different rates according to the amount of revenue shortfall, and will only be granted if the subsidy for fixed costs amounts to min. EUR 500. The subsidy for fixed costs will cover fixed costs in the following amounts:
  • • 25% for a revenue shortfall of between 40% and 60%
    • 50% for a revenue shortfall greater than 60% and up to 80%
    • 75% for a revenue shortfall greater than 80% and up to 100%
• The subsidy for fixed costs per company is limited to a maximum of:
  • • EUR 90m for a subsidy for 75% of fixed costs
    • EUR 60m for a subsidy for 50% of fixed costs
    • EUR 30m for a subsidy for 25% of fixed costs
• Applications can be made from 20 May 2020 until 31 August 2021 via FinanzOnline only.
• Payment of the subsidy can be requested in the following installments:
  • • The 1st instalment covers max. 50% of the anticipated subsidy for fixed costs and can be applied for from 20 May 2020
    • The 2nd instalment covers a maximum of an additional 25%, i.e. a total maximum of 75% of the anticipated subsidy for fixed costs, and can be applied for from 19 August 2020
    • The 3rd instalment can be applied for from 19 November 2020
• Applications for the subsidy for fixed costs must include a breakdown of estimated and actual revenue shortfalls and fixed costs in the relevant period, as well as a declaration by the company that the revenue shortfalls were incurred due to the COVID-19 crisis and that measures to limit losses were implemented as part of an overall strategy.
• The amounts of revenue shortfall and fixed costs must be confirmed by a certified tax advisor, auditor, or chartered accountant. The tax advisor, auditor or accountant must maintain independence in relation to the company making the application and avoid any bias or conflict of interests.
• If the subsidy applied for in the 1st installment (by 19 August 2020) amounts to no more than EUR 12,000, the application does not need to be confirmed by a tax advisor, auditor or accountant. If the subsidy applied for is more than EUR 12,000 and up to max. EUR 90,000, then the confirmation by the tax advisor, auditor or accountant may be restricted to a confirmation of plausibility.
• On request by COFAG and the tax authorities, the company must provide any additional information and submit any documentation or confirmations required to process the application.
• In addition to fulfilling the cumulative prerequisites for the application as listed above, the company must also confirm that:
  • • The fixed costs specified in the application do not include any expenses for repayment of financial liabilities (with the exception of individual interest payments to be made by the contractually agreed deadlines at the time the Austrian COVID-19 Act entered into force, but not prepayments or repayment claims) or expenses for investments, and that these will not be directly financed via the subsidy for fixed costs.
    • The fixed costs are not covered multiple times due to insurance policies or other forms of public support in connection with the economic impacts of COVID-19.
    • In accordance with the applicable legislation, the remuneration of company owners or board members, employees and principal agents of the applicant was calculated in such a manner that it does not include inappropriate pay, pay components, or other payments (in particular, no bonus payments to board members or managing directors may be made in the year 2020, which exceed 50% of the bonus payment for the previous financial year).
    • It is acknowledged that the subsidy for fixed costs will be recorded in the transparency database.
• Furthermore, the applicant must undertake to:
  • • Make every effort to maintain the employment level within the company and introduce all reasonable measures to generate revenues and preserve jobs (e.g. via short-time working)
    • Adjust withdrawals by the owner of the company or distribution of profits to owners to the economic circumstances
• In particular, the following reasons will prevent a fixed cost subsidy being granted in the period from 16 March 2020 to 16 March 2021: (i) the release of capital reserves to increase unappropriated retained earnings, (ii) the distribution of dividends or other legally non-mandatory profit distributions, (iii) the repurchase of shares.
  Subsequently, an appropriate dividend and profit distribution policy must be observed until 31 December 2021.

Authors: Daniela Stastny, Cornelia Kalina, Alexandra Velic