Support Measures for SMEs in The Context of The COVID-19 Outbreak

26 March 2020

The Romanian authorities have recently adopted support measures for the business environment by way of several facilities meant to help companies overcome economic shortages in the context of the Covid-19 outbreak.

I. WHO?

 
The main category of beneficiaries of the support measures are small and medium-sized enterprises (“SMEs”).

As per the European Union guidelines, an enterprise means any entity engaged in an economic activity, irrespective of its legal form.

Such entity is qualified as a SME if it cumulatively meets the following conditions:

i)it has an annual average number of less than 250 employees; and

i)it has either an annual turnover not exceeding EUR 50 million or an annual balance sheet total not exceeding Eur 43 million.

For calculating the above figures, SMEs must first determine whether they are autonomous, partner or linked enterprises. The computation mechanism depends on the type of SME.

ii)An autonomous enterprise – is generally either (i) totally independent and no enterprise has a participation in it, or (ii) it has a holding of less than 25 % of the capital or voting rights (whichever is higher) in one or more other enterprises and/or an enterprise holds a participation of no more than 25 % of the capital or voting rights (whichever is higher) in the enterprise or (iii) it is not linked to another enterprise through a natural person;

ii)A partner enterprise – is the enterprise (i) holding at least 25% of the capital or voting rights in another enterprise and/or another enterprise has a holding equal to or greater than 25 % in the enterprise in question and (ii) the enterprise is not linked to another enterprise (e.g., the enterprise’s voting rights in the other enterprise (or vice versa) do not exceed 50 %);

iii)A linked enterprise – enterprises are linked if: (i) one enterprise holds a majority of the shareholders’ or members’ voting rights in another, (ii) one enterprise is entitled to appoint or remove a majority of the administrative, management or supervisory body of another, (iii) a contract between the enterprises or a provision in the articles of association of one of the enterprises enables one to exercise a dominant influence over the other, or (iv) one enterprise is able to exercise sole control over a majority of shareholders’ or members’ voting rights in another.

II. WHAT?

 
1. Financial measures

Contractual arrangements

The SMEs having totally or partially reduced their activities during the state of emergency, following Governmental decisions issued during this time, may benefit of the postponement of their payment obligations related to the rent for the use of the headquarters and of the secondary offices, as well as with respect to those payment obligations related to public utilities, such as water, electricity, gas or internet. Such benefit is granted based on an emergency situations certificate. Moreover, delay penalties are not owed, during the state of emergency, in relation to such agreements concluded by SMEs with public authorities.

In case of any other agreements concluded by SMEs, except for the ones referred to above, the force majeure event can be raised only pursuant to the failure of the parties to renegotiate and adapt the contractual terms.

The measures adopted by the public authorities in order to fight the Covid-19 outbreak are presumed to be a force majeure event if they are attested through the emergency situations certificate. The presumption is however rebuttable, and the existence of the specific force majeure event may be challenged in court.

Note should be made that the unpredictability of the force majeure event is established by reference to the date the agreement is concluded. Under the current circumstances, the measures taken by the authorities under the presidential decree instituting the state of emergency shall not be deemed unpredictable for agreements concluded during this period.

Support regarding crediting conditions

The SMEs can also benefit of support in relation to credit agreements for both investment and working capital.

The state provides guarantees for investment loans and/or working capital loans/credit lines covering maximum 80% of the financed amount (excluding interest, commissions and other credit-related banking costs). The total financed amount of is of RON 10 million for each SME.

The maximum granted granted to a sole SMEs under working capital loans/credit lines cannot exceed the average working capital expenses in the past two fiscal years and is capped to RON 5 million. The maximum financing for investment loans cannot exceed RON 10 million.

The state guarantees working capital loans/credit lines to an amount up to 90% of the financed amount (excluding interest, commissions and other credit-related banking costs). However, the financed amount is capped to a total of RON 500,000 for micro-enterprises or of RON 1 million for small-sized enterprises. The maximum amount of financing granted to one SME cannot exceed the average of the working capital expenses in the past two fiscal years and is also capped to the above thresholds, namely RON 500,000 and RON 1 million, respectively.

The Ministry of Public Finance subsidises 100% of the interest for abovementioned loans/credit lines starting with the date the loan is granted and until 31 March 2021.

The interest subsidies are approved by law for the first year. These could also be extended for the subsequent two years (i.e. 2021-2022), but only if the economic growth estimated by the National Commission for Strategy and Prognosis for this period is below the one registered in 2020.

The maximum financing period is 120 months – for investment loans and 36 months – for working capital loans/credit lines. The duration for the latter can be extended for up to another 36 months.

Employment related measures

Under the general rules, if an individual employment agreement is suspended (by law), all effects of the agreement (i.e., the performance of the activity by the employee and the payment of the salary by the employer) are suspended as well. If the activity and employment agreement are suspended by initiative of the employers, they must pay to the employees 75% of their base salaries.

Under the new special rules of the GEOs, the indemnification owed under the individual employment agreements suspended by the initiative of the employers is borne from the unemployment insurance state budget, up to 75% of the average gross salary (i.e., to a maximum of RON 4.071,75) for each employee.

The employers benefittig from these provisions are the following:

i)employers who have totally or partially interrupted their activity due to the decisions issued by the authorities during the state of emergency and have obtained emergency situations certificates; and

i)employers whose activity was affected by the COVID-19 outbreak and do not have the financial capabilities to pay all their employees, for up to 75% of their employees (at 21 March 2020), provided that the company registered a reduction of their March revenue (in Romanian: incasari) by a minimum of 25% in comparison with the average revenue from the period of January, 2020 to February, 2020.

The statement regarding the ultimate beneficial owner

The deadline for submitting the statement regarding the ultimate beneficial owner is postponed three months after the state of emergency shall end.

2. Fiscal facilities

Postponement of tax payment deadlines

The Government Emergency Ordinances nos. 29/2020 and 30/2020, adopted in the context of the Covid-19 outbreak, (jointly, the “GEOs”) set forth that the first payment deadline in 2020 for the building tax, the land tax, and the transport means tax is extended from 31 March 2020 to 30 June, 2020. The deadlines related to the bonus for full payment are accordingly extended to 30 June, 2020.

Postponement of certain deadlines related to fiscal facilities

The following deadlines provided by Ordinance no. 6/2019 on the establishment of certain fiscal facilities are postponed by the GEOs:

i)The initial deadline of 31 March 2020 for submitting the notification regarding the intention of restructuring of budgetary obligations is extended until July 31, 2020; and

i)The initial deadline of 31 July 2020 for submitting the restructuring request regarding budgetary obligations is extended until 30 October, 2020.

Late payment interest and penalties

Tax obligations computed starting with 21 March 2020 and unsettled until 30 days after the cease of the state of emergency will not be considered outstanding tax obligations and no late payment interest and penalties will be calculated and owed in respect to such obligations.

Seizure for recovery of the budgetary debts

The tax enforcement measures by seizure with respect to state budget claims are suspended up to 30 days following the end of the state of emergency or, as the case may be, will not start during this time, except for enforcement measures regarding state budget claims established by court decisions in criminal proceedings.

Payment of corporate income tax

The taxpayers that apply the annual payment and reporting system for corporate income tax, with quarterly advance payments, can make quarterly advance payments for 2020 in the amount resulting from current quarterly corporate income tax calculation and the calculation method is applicable for all quarters of fiscal year 2020. Such principle is also applicable to taxpayers with a modified fiscal year.

III. HOW?

 
While some of the measures are directly applicable for all the SMEs, others are only granted based on an application and the some documentation, the most relevant one being the emergency situations certificate. Such certificate shall be issued by the Economy Minister to the eligible companies, in electronic form, free of charge. There are two types of emergency situations certificates available at this point: (i) a blue certificate available to SMEs having totally or partially interrupted their activity as a result of decisions taken by the authorities, and (ii) a yellow certificate available to SMEs registering 25% less income in March 2020, by reference to the average income for January and February 2020. A SME can obtain only one such certificate.

Both types of certificates are issued based on affidavits submitted by SMEs. While there is no preliminary verification made by the authorities in relation to these affidavits, subsequent verifications may be performed, and relevant measures can be taken in case of false declarations.