Investment in Progress
Recently the Austria Wirtschaftsservice (aws) announced the conditions for eligibility for funding under the Covid-Start-up Aid Fund. If a start-up receives fresh equity or equity-like contributions from investors, these funds are doubled by a grant under this support programme (up to a maximum amount of TEUR 800). However this subsidy must be repaid in the event of success within an observation period of 10 years.
The aws-funds can be used to finance running costs (e.g. personnel costs including incidental wage costs, material costs, R&D expenses) and investments. Appropriate applications can be submitted electronically until 15.12.2020.
Start-ups that fully meet the following conditions are eligible:
These criteria must be confirmed by a tax advisor/auditor with a signature when the application is submitted.
a.) What are the requirements for an equity-like contribution?
Deposits similar to equity
In this context e.g. silent partnerships, profit participation rights, convertible loans or profit share loans in connection with crowdfunding may be considered as equity-like contributions.
b.) Do convertible loans fall under funds similar to equity?
In the case of convertible loans, all 3 criteria must be met cumulatively (i.e. 5-year term, profit-related interest rate and subordination). In this context the following aspects have to be kept in mind:
c.) Who is considered as independent private investor?
Independent private investors are all investors with the exception of:
If the fresh equity is provided by investors who do not have direct participation in the start-up, but whose shareholdings are bundled through a joint holding company, this is not harmful for the exclusion criterion “majority shareholder”, provided the 50% limit is not exceeded for the respective investor.
However, where an investor cannot be classified directly/directly as a majority shareholder, the qualification as managing director is an additional reason for exclusion (i.e. the “managing director” criterion must be considered independently).
d.) Can the grant also be paid out to a foreign bank account?
The subsidy is only paid out to a domestic bank account.
e.) When must the investors‘ payment actually be received?
If only part of the fresh equity capital has been invested since 15.3.2020, it should be noted that a maximum of 25% of the subsidy can be based on equity capital contributed in the period 15.9.2019 – 14.3.2020 (but only if an investment was also made after 15.03.2020). I.e. each Euro investment as of 15.3.2020 opens the possibility to include a maximum of 25% of earlier investments in the basis of assessment of the subsidy.
f.) How is the grant to be accounted for in the financial statements?
The presentation of the grant with a condition precedent of repayment in the financial statements is generally dependent on the type of use:
Apart from this, the subsidy and the possible repayment obligation should be explained in the notes.
As not all questions of doubt have yet been resolved, further developments regarding start-up support should be kept under review. In this context, it should be noted that the aws publishes updates to the FAQs from time to time. For further details to the new Corona start-up support please see https://www.aws.at/aws-eigenkapital/covid-start-up-hilfsfonds/.
Christoph Puchner, Managing Director and Tax Advisor & David Gloser, Partner, Chartered Accountant and Tax Advisor from ECOVIS Austria