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New COVID-19-related subsidies – what is important for Austrian start-ups

In response to the current lockdown in Austrian the government recently adopted a new package of measures to support companies dealing with COVID-19 related problems. Besides the existing grants and subsidies and (corporate) income tax measurements, eg liquidity measures related to tax payments and wage free corona bonuses a lockdown revenue compensation and the fixed costs grant for “Phase II – 800.000” was introduced as of 23th November 2020. Both instruments are open for startups, but there are some barriers to take before benefiting from them:

1. Lockdown revenue compensation

In general entrepreneurs which are directly affected by the official closures by the lockdown can apply for the lockdown revenue compensation until 15 December 2020 via FinanzOnline. The applicant can be represented by an authorized tax consultant, auditor or accountant, but it is not mandatory.

a.) Application requirements

There are several requirements which must be met to get the compensation. In this context, the following conditions in particular 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 1 November 2020.
  • Entitled are all companies who are directly affected by the restrictions of the COVID-19 protective measures (protective measures regulation [COVID-19-SchuMaV] and/or emergency measures regulation [COVID-19-NotMV]). These are basically applicants who work on the use of cable cars and rack railroads, in the hospitality industry and for accommodation facilities, sports facilities, certain leisure facilities as well as for sports events or branches in retail and close to body services (eg hairdresser). The classification is based on the ÖNACE Code of the applicant.
  • The compensation is excluded in case of certain tax and financial offences as well as fraud.
  • Further excluded are applicants whose assets are subject to insolvency proceedings (reorganization proceedings as of Section 167 Austrian Insolvency Act are harmless).
  • Applicants must not terminate employment contracts during considered lockdown compensation period.

b.) Amount and type of funding

If all above mentioned requirements are met the compensation per applicant is in general 80% (close to body services). For branches in retail sector there is a staggered replacement of 20%/40%/60% depending on the individual impairment. In this context, a list has been published to classify the retail sector by reference to their ÖNACE code.

As basis for the compensation of the lockdown phase serves the individual loss of revenue which results in a comparison with the revenue in November 2019 as basically stated in the monthly VAT-return for November 2019.

If there is no monthly VAT-return the basis would be the quarterly VAT-return for the fourth quarter of 2019 divided by three. Alternatively the sum of the turnover stated in the last assessed annual VAT return (2019, 2018, 2017 or 2016) divided by twelve or the total of the sales revenues reported in the last assessed or determined income tax , corporate income tax (2019, 2018, 2017 or 2016) divided by twelve. In the event that nothing results in a reasonable revenue the total of the sales revenues reported in the advance VAT returns 2020 divided by the number of months covered by the advance VAT returns would be the basis. The estimated revenue serves as basis for the calculation.

Example: The monthly VAT-return for November 2019 shows EUR 100.000 revenue. The compensation is 20% based on the classification according to the published list. Therefore the lockdown revenue compensation would be EUR 20.000.

The compensation is limited to a maximum amount of EUR 800,000 (certain COVID-19 aids are to be offset, eg100% grants of aws and ÖHT [but not 90% or 80% from COFAG, aws or ÖHT]; the fixed cost subsidy of phase I, the Corona short-time working allowance and grants from the hardship fund are not offset). The minimum compensation amount is EUR 2,300.

c.) Settlement and payment

The settlement and payment will be made by COFAG to the bank account indicated by the company in the application. Payment should be made within 1-2 weeks after submission of the application.

In principle, there is no repayment requirement however exceptions apply, if the applicant violates duties of information or due diligence in course of the application.

2. Fixed cost grant – Phase II 800.0000

In order to maintain the solvency of Austrian companies and to bridge liquidity due to the situation of COVID-19 an additional fixed cost grant was introduced.

a.) Key framework conditions

  • The duration of the period for which the grant can be paid (observation period) has been extended to ten (periods lasting from September 16, 2020 to June 30, 2021). Either all observation periods are linked or there is a possibility of splitting in two blocks (a gap is possible). If the company also applies for lockdown revenue compensation a fixed costs grant for the same period is not possible.
  • An application for the grant to cover fixed costs can now be submitted in the case of at least 30 % loss of revenue (previously 40%).
  • The fixed cost grant is depending on the revenue loss. For example, in the case of a 50 % loss of revenue, 50 % of the fixed costs are covered by the subsidy.
  • The definition of fixed costs eligible for funding has been expanded, so that now, among others, especially deductions for depreciation (AfA), imputed depreciation on moveable assets and leasing payments are also covered.
  • The fixed cost grant is limited to a maximum of EUR 800.000 per company, and the minimum compensation amount is EUR 500. Certain COVID-19 aids are to be offset, eg 100% grants of aws and ÖHT (but not 90% or 80% from COFAG, aws or ÖHT) or lockdown revenue compensation.

b.) Flat-rate fixed cost subsidy

Especially for startups and small companies the new flat rate option could be interesting. In the case of annual revenue of under EUR 120.000 in the last assessed year, a lump sum of 30% of the loss of revenue can be recognized as fixed costs.

The fixed costs do not therefore need to be determined in this case, but the loss of revenue must nevertheless be proven. For this flat-rate fixed cost subsidy, 30% of the loss of turnover can be used as a subsidy. The flat-rate grant is capped at EUR 36.000. Another advantage of the new flat rate is that there is no need for an authorized tax consultant, auditor or accountant. The applicant can submit the application by him or herself.

c.) Newly established companies

Also for new established companies the application for the fixed costs grant is possible if there were revenues before September 16, 2020. If there are no numbers for 2019 available, eg this would be the case if a company was established in 2020, the loss of revenue can be checked for plausibility by means of a planning calculation.

d.) Payment and processing

The fixed cost subsidy is paid out in two tranches:

  • Applications for the first tranche can first be submitted as of November 23, 2020 until June 30, 2021 and equals 80 %of the probable amount to be disbursed.
  • Applications for the second tranche can be submitted as of July 1, 2021 till December 31, 2021. The remaining grant will be disbursed, including changes and adaptions from the first tranche.

Applications are made via FinanzOnline. A processing time of about 2 weeks can be expected.

   

Authors:

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