Proposal for Act on intervention measures for suppresion of COVID-19 epidemic and mitigation of its consequences for citizens and the economy
Authors: Špela Remec, Maruša Polak, Mia Kalaš, Nataša Pipan Nahtigal
On 28 March 2020 the Slovenian government adopted a proposal of the Act on Intervention Measures for Suppression of COVID-19 Epidemic and Mitigation of its Consequences for Citizens and the Economy (hereinafter: “Intervention Law”). If the parliament approves the Intervention Law as proposed by the government most of the measures will apply from 1 April 2020 until 31 May 2020 (or for additional 30 days, if the COVID-19 epidemic announcement is not revoked by 15 May 2020). Among others, the Intervention Law foresees the following measures for the economy:
No advance payments of corporate income tax for April and May
Exemption from advance payments of 2020 corporate income tax which fall due from the enforcement date of the Intervention Law until 31 May 2020.
Amended payment deadlines and performance deadlines in transactions involving the public sector
- Payment deadlines for payments to private entities or suppliers by direct or indirect users of the state budget are shortened to 8 days.
- Payment deadlines between business entities in cases where the creditor is a public body (including all legal entities in which the state has a majority ownership stake) shall be 60 days. This deadline will continue to apply for another year after the COVID-19 epidemic announcement is revoked.
- In respect of agreements on supply of goods or services or provision of public works entered into between private legal entities and certain public bodies, the provisions on contractual penalties for delays shall not apply during the COVID-19 epidemic. Contractually agreed deadlines shall be extended for the period between the date on which the contract should have been performed and the revocation of the COVID-19 epidemic announcement.
Exemption from enforcement, suspension of execution of enforcement orders
- All benefits paid on the basis of the Intervention Law are exempted from enforcement under the Claim Enforcement and Security Act (Zakon o izvršbi in zavarovanju) and from tax enforcement under the Tax Procedure Act (Zakon o davčnem postopku), as well as do not constitute part of bankruptcy estate in case of personal bankruptcy under the Financial Operations, Insolvency Proceedings, and Compulsory Dissolution Act (Zakon o finančnem poslovanju, postopkih zaradi insolventnosti in prisilnem prenehanju).
- Executions of enforcement orders in enforcement procedures conducted under the Claim Enforcement and Security Act shall be suspended when the Intervention Law enters into force. Suspension will not apply to enforcements based on a claim for legal alimony and damages for lost alimony due to the death of the alimony provider.
- In tax enforcement procedures conducted under the Tax Procedure Act the execution of enforcement orders shall be suspended when the Intervention Law comes into force.
Amendments of insolvency legislation
- Any legal entity or entrepreneur shall be considered “continuously insolvent” also if it is in delay with payments of salaries and contributions to workers by more than one month from the time when it received repayment of salary and contribution compensations on the basis of laws laying down intervention measures for protection of jobs due to consequences of the COVID-19 epidemic on the territory of the Republic of Slovenia. The insolvency presumption shall apply for another four months after the measures under the Intervention Law cease to apply.
- The management is not obliged to file for commencement of compulsory settlement or bankruptcy if the company’s insolvency occurred as a consequence of declaration of the COVID-19 epidemic. This condition shall be considered as fulfilled if the respective company performs an activity (sales of goods or services) which has been temporarily prohibited under a provision or act issued by the government, ministry or municipality due to the COVID-19 epidemic. This measure shall apply in the period of the declared COVID-19 epidemic and for another three months after the measures under the Intervention Law cease to apply.
- If bodies of a company are – due to objective consequences of declaration of the COVID-19 epidemic – not able to carry out certain acts and measures under the Financial Operations, Insolvency Proceedings, and Compulsory Dissolution Act which have been foreseen in the financial restructuring plan, they must commence with such acts and measures no later than one month after the measures under the Intervention Law cease to apply. Also the deadlines for completion of certain other obligations of the management shall not expire before one month after the measures under the Intervention Law cease to apply.
- The period for which the court may postpone deliberation on a creditor’s proposal to initiate bankruptcy procedure and the period in which a debtor may justify its request for postponement of deliberation shall be four months if the company’s insolvency occurred as a consequence to the declaration of the COVID-19 epidemic. Also in such event the condition shall be considered as fulfilled if the respective company performs an activity (sales of goods or services) which has been temporarily prohibited under a provision or act issued by the government, ministry or municipality due to the COVID-19 epidemic. This measure shall be used in any bankruptcy procedure upon the creditor’s application which the creditor files no later than two months after the measures under the Intervention Law cease to apply.
- Workers will be able to acquire certain rights under the Public Guarantee, Maintenance and Disability Fund of the Republic of Slovenia Act (right to payment of unpaid salaries, compensations and severance payments) if they show that (i) a proposal for initiation of a bankruptcy procedure was filed against their employer, that (ii) they have previously requested protection of their rights within the deadlines and in the manner required under the employment law provisions, and that (iii) these rights were not granted to them according to provisions under (ii). This measure shall continue to apply for one month after termination of measures under the Intervention Law on reimbursement of compensations for workers to whom employers are not able to provide work and on reimbursement of salaries for workers who are not able to work due to force majeure. This measure will likely be used if courts do not decide on commencement of bankruptcy procedures during the declared COVID-19 epidemic.
Purchase of Slovenian food in public institutes
- Until the end of 2020 public institutes carrying out green public procurement procedures that do not exceed, on an annual basis, the value for publication in the Official Journal of the European Union, are required to acquire (i) at least 50% of produced agricultural products and foodstuffs from the territory of the Republic of Slovenia and (ii) at least 50% of processed agricultural products and foodstuffs in which all stages of production and processing were carried out in the Republic of Slovenia.
Public procurement facilitations
- Until 15 November 2020, the Public Procurement Act shall apply, in the general filed, only to public procurement procedures with an estimated value (excluding value added tax) of twice the amount provided for in the Public Procurement Act, i.e., equal to or greater than EUR 40,000 for the public procurement of the supply of goods or services or design contests and EUR 80,000 for the public works contracts.
- Until 15 April 2021, public procurement for the needs of the narrower parts of the municipality is facilitated.
Moratorium on repayment of loans from the Public Fund of the Republic of Slovenia
- The Public Fund of the Republic of Slovenia, which performs lending through calls for tenders, may authorize any borrower a moratorium on payment of obligations under the loan agreement for a maximum period of 12 months, if such obligations of the borrower have not yet fallen due. In this case, the end date of the loan agreement is extended for the duration of the moratorium, which does not affect the calculation of the amount of each instalment. The borrower must submit the application for moratorium no later than six months after the revocation of the COVID-19 epidemic announcement. The Public Fund reprograms the outstanding and mature liabilities of borrowers who were late in fulfilling their obligations before the declaration of the COVID-19 epidemic on the basis of an application for reprogramming, by increasing the amount of individual instalments.
Priority funding for R&D and production for managing the consequences of the epidemic
- Funds from the integral budget of the Republic of Slovenia, from the European Social Fund (ESF) and the European Regional Development Fund (ERDF) may, as a priority, be earmarked to encourage investments needed for better management of the consequences of the COVID-19 epidemic in healthcare, in particular for investments into research, development and production of vaccines, medicines and protective equipment.
Facilitation of customer identification
- Certain entities (e.g., insurance companies, brokerage companies, investment funds, etc.) that are required to implement measures to detect and prevent money laundering and terrorist financing under the Prevention of Money Laundering and Terrorist Financing Act (Zakon o preprečevanju pranja denarja in financiranja terorizma), may exceptionally carry out the customer identification and verification measures within one month after the conclusion of the business relationship or within one month after the revocation of the COVID-19 epidemic announcement, provided that all of the following conditions are met:
- this is necessary to ensure undisturbed business operations of the client during the COVID-19 epidemic or to prevent significant damage to the client’s business as a result of the COVID-19 epidemic;
- there is no increased risk of money laundering or terrorist financing;
- all possible actions for the identification and verification of the client which do not contravene instructions of the competent authorities during the COVID-19 epidemic are performed before entering into a business relationship, by obtaining the necessary information and identifying and verifying the client’s identity by video link, whereby the video conversation is recorded and the recording is kept for one month after the revocation of the COVID-19 epidemic announcement.
Extended deadlines for annual reports and for reporting under environmental legislation
- In 2020 insurance companies may submit their annual reports and auditor’s reports on auditing the annual report to the Insurance Supervision Agency by the end of May at the latest.
- In 2020 public companies and brokerage companies may exceptionally publish annual reports, semi-annual reports or consolidated annual reports any time until 31 May 2020.
- Certain reporting deadlines as set by the Environmental Protection Act (Zakon o varstvu okolja), the Water Act (Zakon o vodah) and their implementing regulations, have been extended.
Measures for the self-employed
- Those self-employed who do not owe any tax payments and will declare themselves affected by the crisis, will receive (i) EUR 350 in March if they claim a decrease in income compared to February 2020 by at least 25%, and (ii) EUR 700 in each of April and May 2020 if they claim a decrease in income compared to February 2020 by at least 50%. Each beneficiary will have to repay the received aid if his income does ultimately not decrease by at least 20% in the first half of the year compared to the same period of 2019, or if he achieves more than 20% income growth in the second half of 2020 compared to the same period in 2019.
- Exemption from all compulsory social security contributions for April and May 2020: during this period their contributions will be borne by the state and their rights will be preserved.
- Exemption from advance payment of personal income tax on income from the performance of activities for 2020, which fall due in the period from when the Intervention Law enters into force until 31 May 2020.
Measures on protection of borrowers and labour law measures are summarized in separate posts. In this respect, it is important to note that companies shall be prohibited from any dividend distributions, payments for business performance and/or bonuses to the management in 2020, otherwise the companies will have to repay the following funds received in connection with their employees, together with statutory default interest: (i) reimbursement of salary compensation for workers sent to wait for work at home; (ii) reimbursement of salary compensation for workers who cannot work because of force majeure; and / or (iii) payment of pension and disability insurance contributions with respect to workers who work.