New support measures: Funding for uncovered fixed costs
Author: Jera Majzelj
The Slovenian National Assembly adopted a new round of intervention measures, the so called PKP6 package. The new law is still to be confirmed by the National Council, and will only enter into force following publication in the Official Gazette. Amongst the measures that we are already familiar with, an entirely new measure in support of the economy was adopted in the form of partial funding of uncovered fixed costs.
The wording that was adopted by the National Assembly in PKP6 is somewhat different from the initial proposal (which we discussed here), the most significant change being the lowering of the revenue drop threshold from 40% to 30%. A summary of the new scheme is presented below:
Uncovered fixed costs
PKP6 does not say what exactly are the uncovered fixed costs. Based on the supporting documentation for the proposal, we can assume that these costs are defined as net losses in a particular period (AOP 187 in the profit and loss statement).1 The funding will namely not be based on actual uncovered fixed costs of an undertaking. PKP6 gives an estimate of uncovered fixed costs, which is made based on the revenues of the undertaking in the previous year. This estimate is then the basis for somewhat unclear description of refund calculation, which is further subject to several limitations.
Regardless of some inconsistencies, it seems that an undertaking is not eligible for funding if it does not sustain net losses in the relevant (eligible) period – that is if, despite suffering a material decrease of revenues, the undertaking does not have uncovered fixed costs.
Eligible period
This measure will be available for the period from 1 October to 31 December 2020. This period may be extended by no more than 6 months by the Government.
Excluded undertakings
As with the majority of intervention measures, some entities are excluded per se:
- national or municipality budget users, direct or indirect, whose percentage of income from public sources in 2019 exceeded 70%;
- employers performing financial or insurance services with more than 10 employees;
- foreign diplomatic or consular representations and certain similar institutions.
Basic conditions for beneficiary status
PKP6 further limits the beneficiary status with the following formal conditions:
- the legal or natural person has been registered for performing economic activities at the latest by 1 September 2020;
- on the day PKP6 enters force, this person has at least one employee or is self-employed or a shareholder/founder who is also a manager, included in mandatory insurance (in line with Article 15 or 16 of the Slovenian Pension and Disability Insurance Act).
The main condition for claiming the funding is contained in the requirement that the legal or natural person is only eligible if, due to the consequences of Covid-19 epidemic, this person cannot perform its activities or can only perform them in a materially limited scope. This condition is deemed fulfilled only when the net sales revenues of the beneficiary in the period from October to December 2020 decreased by 30% or more compared to the same period in 2019.2
Since the filing for the funding will need to be made by the end of 2020, when all financial data will not have been known, potential beneficiaries will need to rely on their own assessments. If these prove to be wrong, the funding received will need to be returned (see below).
Calculation base and funding percentage
The basis for the funding calculation is the yearly turnover for 2019.3 The partial refund for each month of operations in the period from October to December 2020 is to be determined in the following percentage:
| 0.6% of the base per month | if the activities (i.e. turnover) decrease by 30 – 70% |
| 1.2% of the base per month | if the activities (i.e. turnover) decrease by more than 70% |
Caps and limitations
The refund amount that a beneficiary may receive is capped:
- at EUR 1,000 per employee with an indefinite term contract (or self-employed / shareholder / founder who is also a beneficiary) per month;
- at 70% (for medium and large enterprises) or 90% (for micro and small enterprises) of net loss of the beneficiary in its profit and loss statement in the eligible period, i.e. October to December 2020.
How many employees the beneficiary has and what is the size of the enterprise is to be established at the time when the beneficiary makes the request for funding.
Support is further limited by general rules on state aid:
- undertaking may not already be in difficulty as of 31 December 2019 (within the meaning of the General Block Exemption Regulation);
- the beneficiary makes sure that the uncovered fixed costs are not covered by other sources, such as insurance, temporary aid measures or support from other sources;
- funding under this measure may not exceed the limitations set forth in point 3.1 (for beneficiaries registered on or after 1 October 2019) and point 3.12 (for other beneficiaries) of the Temporary Framework for State Aid Measures to Support the Economy in the Current Covid-19 Outbreak, which was issued by the European Commission. This framework also sets forth the maximum amounts that undertakings may receive under such intervention measures in relation to COVID‑19.
Filing a request
Undertakings that estimate that they will fulfil the conditions for partial funding must submit their filing by using the information system of the Financial Administration of the Republic of Slovenia, namely at the latest on 31 December 2020. The Financial Administration is supposed to pay out the support on the 20th day in the month following the month when the filing will have been made. If filing is made in November or December, the funding will be paid out on 20 January 2021.
Funding returns
If it turns out that the beneficiary has made a wrong assessment in believing that the conditions will be met, it must inform the Financial Administration about this and repay the excess of support in 30 days following a decision from the Administration being served. After the expiry of this deadline, statutory late interest will be charged.
[1] The Temporary Framework for State Aid Measures to Support the Economy, which was issued by the European Commission and which is the basis for the wording of PKP6, defined uncovered fixed costs as fixed costs incurred by undertakings during the eligible period which are not covered by the profit contribution (i.e. revenues minus variable costs).
[2] If the beneficiary was only established after 1 October 2019, it shall be deemed that it is eligible for funding if the revenues in the eligible period (October – December 2020) decrease by 30% or more compared to the average monthly revenue from registration until 1 September 2020, adjusted to the same period.
[3] If the beneficiary was only established after 1 October 2019, the basis is calculated from turnover made until 1 September 2020, readjusted for the same period, i.e. 1 year.
