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COVID-19: New government support instruments – revenue compensation for indirectly affected entrepreneurs and default bonus

The Austrian government recently implemented two new funding instruments, a revenue compensation for indirectly affected entrepreneurs (revenue compensation II [“Umsatzersatz II”]) and a default bonus(“Ausfallsbonus”) in order to support companies dealing with COVID-19 related problems. Both instruments are open for startups, but there are some barriers to take before benefiting from them:

1. Lockdown revenue compensation II (“Umsatzersatz II”)

In general entrepreneurs which are indirectly affected by the official closures in November and December 2020 according to the lockdown are now able to apply for a lockdown revenue compensation under certain conditions.

a.) Application requirements

There are several requirements which must be met to get the compensation. In this context, the following conditions in particular – amongst others – must be taken into account:

  • The applicant must have a registered office or a permanent establishment in Austria and must have an operational activity in Austria, the business form is irrelevant (eg limited liability company, sole proprietorship, etc…).
  • The applicant must have achieved revenues before 1st December 2020.
  • Entitled are all companies who are indirectly substantially affected by the official restrictions, i.e. generated at least 50% of its sales from businesses that would be directly affected by the COVID-19 protective action or emergency action ordinances during November 2020 or December 2020, if operations were unchanged from the previous year, and the applicant business operates in one of the industries listed in the published industry categorization during a period in November 2020 or December 2020.
  • Loss of sales of more than 40% per observation period in November 2020 or December 2020 based on the comparative period 2019 (for new founded companies compared to the average sales in the period from the beginning of the month in which sales were first achieved until 31st October 2020)
  • Furthermore, no reasons for exclusion may apply (eg tax and financial offences, insolvency proceedings, temporary no termination of employment contracts, etc…).

 

b.) Observation periods and replacement rate

If all above mentioned requirements are met the compensation is depending on the period in which the applicant is indirectly significant affected by the COVID-19 protective action or emergency action ordinances. There may be one or more observation periods. Assessment basis for the compensation are the comparable sales of the comparative period:

The comparative sales must be basically derived from the VAT-return. In exceptional cases (e.g.: no obligation to submit a VAT-return, sales from travel services/differential taxation, inclusion in a VAT group), the sales have to be determined according to the provisions of the (Corporate) Income Tax Act.

Those sales should only take sales from operational activities into account. Furthermore applicants who are only partially active in industries that are indirectly affected must adopt the affected sales. This has to be done based on experience values and has to be disclosed in the application.

Depending on the individual period in which the applicant is indirectly significant affected by the COVID-19 protective action or emergency action ordinances, a pro rata (daily) determination of the comparative sales must be made, eg if a company was indirectly significantly affected from 7.12.2020 – 16.12.2020 (10 days), December 2019 as to be used as comparative period. The sales are calculated by dividing the sales from December 2019 by 31 and multiplying the result by 10.

The individual percentage (replacement rate) of the tax base that is refunded depends on the industry from which the applicant predominantly obtains the subsidized sales. The industry classification of the Federal Ministry of Finance is to be used, which is attached as Annex 2 to the subsidy guidelines.

c.) Application

In principle, the application must be submitted by an authorized tax advisor, auditor or accountant. In exceptional cases, the applicant can submit the application (if the probable revenue compensation does not exceed EUR 5,000, there are only directly generated sales and the estimated share of the subsidized sales does not exceed the actual share of subsidized sales in the reference period). The application must be filed till 30th June 2021 via FinanzOnline.

2. Default bonus (“Ausfallsbonus”)

The aim of the bonus is to give companies financial security until the end of the pandemic and support them with additional liquidity. The funding consists of a bonus and, optionally, an advance payment on the fixed cost subsidy 800,000 (advance payment “FKZ 800”).

a.) Application requirements

There are several general requirements for the default bonus which are very similar to the lockdown revenue compensation II (eg. a registered office or a permanent establishment in Austria, loss of sales have to be at least 40%, no tax and financial offences, no insolvency). Additionally newly founded companies that had no sales before 1st November 2020 are excluded.

In order to be granted the FKZ 800 advance payment, it is also necessary that the requirements for the granting of an FKZ 800 are met and the applicant undertakes to apply for an FKZ 800 by 31st December 2021

b.) Observation periods and replacement rate

The observation period for the bonus is the respective calendar month and an application is possible for the calendar months from November 2020 to June 2021. The comparison period is the calendar month corresponding to the calendar month of the period under consideration from March 2019 to February 2020.

The default bonus amounts to a total of 30% of the loss of sales per calendar month and the funding is structured as follows:

The loss of sales is calculated by determining the difference between the sales of the observation period under consideration (calendar month between November 2020 and June 2021) and the sales of the comparative period (calendar month from the period March 2019 to February 2020).

The calculation of the comparative sales is done by the tax authorities using the following methods:

  • As basis serves the revenue stated in the monthly VAT-return for the respective calendar month. If there is no monthly VAT-return the basis would be the quarterly VAT-return divided by three.
  • Alternatively the sum of the sales stated in the last assessed annual VAT-return (2019, 2018, 2017 or 2016) divided by twelve or the total of the sales reported in the last assessed or determined income tax / corporate income tax return (2019, 2018, 2017 or 2016) divided by twelve can be used.
  • In the event that nothing results in a reasonable sales the sum of the declared sales from the first time sales until the end of the 3rd quarter of 2020 (derived from the VAT returns) is used. The sales have to be adapted to a monthly value.

 

In some cases the applicant has to calculate the comparative sales on its own (e.g.: if the comparison period includes sales that are not from an operational activity or originate from the sale of a property in the sense of an auxiliary transaction for VAT purposes; companies that generate sales that are not taxable under the provisions of the VAT Act, but are taxed in Austria under the provisions of the [Corporate] Income Tax Act; companies founded after 31st October 2018 with no monthly or quarterly VAT-return until October 2020 and where no assessed VAT-/CIT-statement is available).

The applicant has to notify the tax authorities of the sales of the respective observation period. When determining these sales – in a manner comparable to determining the comparative sales – the subsidy guideline to the default bonus regulates in which cases the sales have to be determined in accordance with the provisions of the VAT Act and under which cases the sales have to be determined according to the provisions of the (Corporate) Income Tax Act.

c.) Application

The application can be submitted by the applicant via FinanzOnline for any observation period from the 16th of the following month to the 15th of the third following month (e.g.: for February 2021, the application is between 16th March 2021 and 15th May 2021). Apart from that, the application for November and December 2020 must be submitted by 15th April 2021.

 

Authors:

Christoph Puchner, Managing Director and Tax Advisor & Katharina Geweßler, Tax Advisor from ECOVIS Austria