Austrian Ceiling Regulation published – reclassification of COVID-19 subsidies exceeding the ceilings now possible in company groups

During the COVID-19 pandemic, the BMF (Austrian Ministry of Finance) has paid out several aids in the form of COVID-19 subsidies to companies pursuant to EU state aid law via the COVID-19 Finanzierungsagentur des Bundes GmbH (COFAG). In the course of implementation in Austria, the design of the ceilings for state aid pursuant to section 3.1 of the underlying temporary framework (revenue shortfall bonuses, fixed cost subsidy 800, lockdown revenue compensation) as well as for state aid pursuant to section 3.12 of the temporary framework (compensation for losses I – III) deviated from the EU provisions.

The respective Austrian regulations stipulated that any legal entity is eligible to apply for itself. Therefore, companies were able to apply for subsidies irrespective of whether the applicant company was part of a company group or not. The stated “ceilings per company” in the national guidelines have referred to the individual companies instead of company groups. Pursuant to EU state aid law, the state aid total may not exceed the ceilings stipulated in section 3.1 and 3.12 of the temporary framework for the entire company group.

The BMF was finally able to reach an agreement with the European Commission on the treatment of the violation of EU state aid law. On 20 June 2024 the Austrian regulation on the reclassification of state aid granted by COFAG exceeding the ceilings to a compensation for losses, a compensation for damages or a de-minimis state aid (“Austrian Ceiling Regulation”) was published. The Regulation is expected to ensure processing of COVID-19 subsidies exceeding the ceilings in accordance with EU state aid law.

General information

The ceilings amount to in total EUR 2.3m for state aid pursuant to section 3.1 of the temporary framework and to EUR 12m for state aid pursuant to section 3.12 of the temporary framework. The ceilings apply to the entire company group of which the recipient of the state aid is part of.

The exceeding amount is the total of the state aid exceeding a ceiling of a company group granted or to which a company group is entitled.

The applicant companies are now allowed to reclassify the exceeding amount to a (i) compensation for losses, (ii) compensation for damages or (iii) a de-minimis state aid, if they fulfil the requirements. The reclassification takes place in the following order: initially to a compensation for losses then to a compensation for damages and lastly to a de-minimis state aid.

The application for reclassification has to be submitted by a tax advisor, auditor or accountant authorised in writing. Finally, for a reclassification to a compensation for losses and/or compensation for damages, a written confirmation in form of an expert opinion by a tax advisor, auditor or accountant is required as well.

Submission of the application for reclassification is possible until 31 October 2024. Repeated application is not permissible.

Reclassification to a compensation for losses

Reclassification to a compensation for losses requires that the losses of the company group are calculated based on section 4.2. of the guidelines on compensation for losses for one or several assessment periods (time gaps are permissible) between 16 September 2020 and 31 March 2022 and compared to the result of the respective reference period 2019.

The relevant losses are the losses remaining after deducting financial measures and third-party aids incurred without exceeding a ceiling and pertaining to these assessment periods. The amount of the compensation for losses is 70% (90% for small or micro corporations) of the relevant losses, capped at the exceeding amount and the difference between EUR 12m and the state aid granted to the company group pursuant to section 3.12 of the temporary framework.

The minimum revenue shortfall is calculated on the level of the company group as well.  Revenues of several assessment periods and of the corresponding months of the reference period are to be added up.

Reclassification compensation for damages

Reclassification to a compensation for damages requires that the damage is determined on the level of the individual company for one or several assessment periods (time gaps are permissible) between 16 September 2020 and 31 March 2022 in which the company was subject to a lockdown measure (“affected”).

The damage is the difference between the result determined for the assessment period compared to the result from the respective reference period 2019, if this difference is negative. The damage is calculated as loss pursuant to section 4.2. of the guidelines on compensation for losses. General consequences of the overall economic decline in demand due to the pandemic are not part of the damage, meaning that the result of the reference period is subject to a lump-sum discount of at least 5%.

The relevant damage is the total of the calculated damages of the individual companies in a company group less all financial measures and third-party aids granted without exceeding a ceiling of the company group.

The amount of the compensation for damages corresponds to the relevant damage and is capped at the exceeding amount. If the company group reports a net income for the financial year which includes the total assessment period, the amount of the compensation for damages is to be reduced by 10% of the calculated net income for the year. The amount of the compensation for damages is to be reduced by further 5% (therefore, 15% in total) if the net income for the year stated above is higher than the net income for the reference period 2019.

Reclassification de-minimis state aid

Reclassification to a de-minimis state aid requires the calculation of the de-minimis framework of the company group which may be between EUR 20,000 and EUR 750,000 depending on the applicable de-minimis directive. The de-minimis framework is the difference between the respective ceiling and the total of the aid received by the company group based on the respective de-minimis directive in the previous three years or tax years from Austrian funding agencies. Reclassification to a de-minimis state aid is possible up to the amount of the de-minimis framework.

Authors: Daniela Stastny / Stefan Ilic