At a press conference today, on 29 March 2020, representatives of the Government of the Slovak Republic presented the first set of economic measures, the purpose of which is so-called First Aid to Employees, Companies and Self-Employed Entrepreneurs.
This is the first package of economic compensation measures in a historically unprecedented extent of up to EUR 1 billion in direct financial assistance per month, plus EUR 500,000 per month in the form of state guarantees for bank loans to entrepreneurs to overcome liquidity problems. The exact paragraph wording of these measures is intensively being prepared and is to be approved by the Government of the Slovak Republic at its scheduled meeting on Tuesday morning of 31 March 2020, with the relevant legislation planned to be submitted to the National Council of the Slovak Republic for approval via abbreviated legislative procedure on Tuesday, 31 March 2020, in the afternoon or on Wednesday of 1 April 2020.
We will inform you as soon as the paragraph text of the legislation and more details on these measures are available. The information below summarizes publicly published information as presented by the representatives of the Government of the Slovak Republic during the presentation of the first set of economic measures on 29 March 2020. For this reason, the finally adopted legislative text of these measures may differ.
At the same time, representatives of the Government of the Slovak Republic confirmed that another set of economic compensatory measures is in the process of preparation and will be submitted to the National Council of the Slovak Republic for approval probably on Wednesday, April 1, 2020, or on Thursday, April 2, 2020, addressing e.g. specific problems of travel agencies, respectively. possible adjustments for temporary deferral of mortgage and other loan instalments, deferral of lease payments under leasing contracts, etc. Negotiations of the Ministry of Finance of the Slovak Republic and the Ministry of Economy of the Slovak Republic with representatives of commercial banks and leasing companies are already under way.
FIRST AID TO EMPLOYEES, COMPANIES AND SELF-EMPLOYED ENTERPRENEURS
- The State shall reimburse 80 percent of an employee’s salary to the firms whose operations are closed mandatorily.
A reimbursement by the state of 80% of the salary of an employee who had to remain at home due to the mandatory closure of his employer’s operation (i.e. including payment of social and health contribution payments for employees and employee’s taxes) up to the limit of gross wage in the amount of EUR 1,100/month is envisaged. [Although the introductory information mentioned the “salary”, we believe that, in the context of labour legislation, the final text of the adopted legislation may well finally address “compensation of the salary in the amount of average income”; of course, decisive will be the wording of the adopted legislative text.] One of the conditions for obtaining this reimbursement is that the employee has not been previously given a notice of termination of employment by the employer and the notice period does not run. Payment of the reimbursements should start from 15 April 2020. The measure should cover the situation of approximately 800,000 employees in the Slovak Republic. In practice, it will be mainly the employees of small and medium-sized companies operating hotels, restaurants, wellness, the operation of which was obligatory closed due to hygienic measures in connection with COVID-19. This measure does not yet address the situation of large employers such as car manufacturers, steel producers, etc. (not being mandatorily closed).
- In the case of April 2020, when the revenues of a company fall by more than 20 per cent, the State shall contribute EUR 180 to the employee or self-employed entrepreneur, when they fall by more than EUR 40 per cent, the State shall contribute EUR 300 per cent, when they fall by more than 60 per cent, the State shall contribute EUR 420, and when they fall by more than 80 per cent, the State shall pay EUR 540.
This measure is intended for companies that have not been mandatorily closed due to sanitary measures in connection with COVID-19, but have been affected by this situation secondarily and suffer from a decline in revenues. The decline in revenues for March 2020 will be assessed from 12 March 2020 proportionally, for the month of April in its entirety; and revenues will be compared to the same period of the last year. Entrepreneurs will declare a decline in revenues for these purposes through the so-called “sworn affidavit” and ex-post tax audits will be carried out to verify the correctness of the declared decrease in revenues and the eligibility of these applications for contributions (rather severe sanctions are to be introduced for cases of identified breach of application rules). A maximum limit of up to EUR 200,000 per company per month is to be set in case of this measure. In the case of self-employed entrepreneurs, the salary will not be considered in the calculations and the tax base is to be taken into account. Payment of these contributions should start from 15 April 2020. The measure should cover the situation of approximately 800,000 employees and 200,000 self-employed entrepreneurs in the Slovak Republic.
- Provision of bank guarantees of EUR 500 million per month.
Representatives of the Government of the Slovak Republic confirmed that they are intensively negotiating with representatives of commercial banks and the banks will be ready to provide state-guaranteed loans to entrepreneurs as so-called “fast loans” without complicated administration or formalities to provide vulnerable entrepreneurs with flexible support in overcoming outages in liquidity and at the same time provide attractive conditions for borrowers.
- For employees in quarantine and parents taking care of a family member, 55 percent of their “daily assessment base” (being grossly 55 percent of their daily gross salary subject to mandatory caps) will be paid for at all times.
It was communicated that this is a measure that has already been adopted by the Government of the Slovak Republic and approved by the National Council of the Slovak Republic on 25 March 2020 and is effective from 27 March 2020. [If it is so, then although the presented information leaflet addresses “55 percent of the gross salary”, we believe that it should correctly read “55 percent of their “daily assessment base” (being grossly 55 percent of their daily gross salary subject to mandatory caps). This can be also further clarified.] The Social Insurance Agency pays for an employee in quarantine sickness benefit from the first day of quarantine or isolation. This applies only to incapacity for work due to quarantine or isolation ordered in the current COVID-19 crisis. Family member care allowance for the parents when caring for children who have to stay home due to the closure of schools and similar facilities (kindergartens) during the COVID-19 crisis is provided for the entire period during which personal care needs to be taken and the full day of the relevant period, subject to the conditions set out in the Act.
- Postponement of payment of employer’s share on social and health contribution payments for employees when revenues fall by more than 40 percent.
The decline in revenues for March 2020 will be assessed from 12 March 2020 proportionally, for the month of April in its entirety; and revenues will be compared to the same period of the last year. Entrepreneurs will declare a decline in revenues for these purposes through the so-called “sworn affidavit” and ex-post tax audits will be carried out to verify the correctness of the declared decrease in revenues and the eligibility of these applications (rather severe sanctions are to be introduced for cases of identified breach of application rules). Postponement of payment of employer’s share on social and health contribution payments for employees is allowed in the case of the contributions share payable by the employer, social and health contribution payments share payable by the employees are to be duly deducted and paid by the employer on behalf of the employee/s.
- Postponement of income tax advances when sales fall by more than 40 peer percent.
The decline in revenues for March 2020 will be assessed from 12 March 2020 proportionally, for the month of April in its entirety; and revenues will be compared to the same period of the last year. Entrepreneurs will declare a decline in revenues for these purposes through the so-called “sworn affidavit” and ex-post tax audits will be carried out to verify the correctness of the declared decrease in revenues and the eligibility of these applications (rather severe sanctions are to be introduced for cases of identified breach of application rules). The measure is to address the situation of entrepreneurs who either had losses in the previous accounting period or vice versa, had relatively high profits in 2019, but now, due to the situation caused by COVID-19, expect a significant drop in revenues.
- Possibility of offsetting losses not yet claimed since 2014 inclusive.
This option can be exercised by entrepreneurs who by now have not set-off the unused tax loss for any reason. In practice, it is possible that companies will still be able to do so on tax returns for financial year 2019, as the deadline for filing these tax returns was postponed until 30 June 2020.