COVID-19: Intervention measures to support the economy

Authors: Špela Remec, Nataša Pipan Nahtigal

On 21 April 2020, the Slovenian Government proposed the amendments to the Act on Intervention Measures for Suppression of COVID-19 Epidemic and Mitigation of its Consequences for Citizens and the Economy as adopted by the Slovenian Parliament on 3 April 2020 (hereinafter: “Intervention Law”). On 28 April 2020, the Parliament passed the proposed amendments of the Intervention law, which entered into force on 1 May 2020. In this post we provide an update on the intervention measures intended to support the economy. Most of the measures under the Intervention Law apply from 13 March 2020 (the day after the declaration of the COVID-19 epidemic in Slovenia) until 31 May 2020 (or for additional 30 days, if the COVID-19 epidemic announcement is not revoked by 15 May 2020.

We are separately reporting on changes in administrative and court procedures, new state guarantee scheme, amendments related to mandatory moratorium on bank loans, measures available to employers and measures in relation to construction law.

Support is limited by EU state aid rules

The support foreseen under the Intervention Act is granted according to the EC Temporary Framework for State aid measures to support the economy in the current COVID-19 outbreak, which means that among others the following conditions apply:

• Undertakings which were considered as undertakings in difficulty as of 31 December 2019, may not benefit from the support measures under the Intervention Law.
• The gross amount of aid received by a single undertaking under the Intervention Law should not exceed EUR 800,000 or EUR 120,000 for an undertaking active in the fishery / aquaculture sector, or EUR 100,000 for an undertaking active in the primary production of agricultural products.
• Prohibition of double financing (whereby de minimis aid remains allowed).

Employment-related aid in the amount exceeding EUR 800,000 may still be granted to a large undertaking provided that either:

• aid amounts to up to 80% of the salaries, but only with respect to those employees whose employment would have otherwise been terminated due to COVID-19, or
• aid amounts to up to 100% of the COVID-19-related damages, but such aid is previously (separately) approved by the European Commission.

Tax measures

• Exemption from advance payments of 2020 corporate income tax which fall due from 11 April 2020 Law until 31 May 2020.
• Monetary donations to the Republic of Slovenia or another EU Member State for the purposes of elimination of the consequences of the COVID-19 epidemic may qualify for additional reduction of taxable income.
• From 13 March 2020 to 31 July 2020 supplies of protection and medical equipment, including supplies from the EU, may benefit from VAT exemption, if such supplies (i) are intended to be handed out free of charge to those affected by the COVID-19 epidemic or medical personnel, or (ii) are supplied to state or municipal bodies, other public law entities or charity institutions.

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 the Republic of Slovenia, self-governing local community, public funds public agency, public institute, or public utility institute 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 – other than those relating to the supply of protective equipment necessary to combat the COVID-19 epidemic – provisions on contractual penalties for delays shall not apply during the COVID-19 epidemic. Contractually agreed deadlines shall be extended for the duration of the epidemic.

Exemption from enforcement, suspension of enforcement

• All benefits paid on the basis of the Intervention Law, except the benefits which represent a salary compensation, 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). If an income which is excluded from enforcement or the bankruptcy estate under the Intervention Law had been confiscated, paid to the creditor or transferred to the bankruptcy estate before the Intervention Law entered into force (11 April 2020) and such income was not excluded from enforcement or the bankruptcy estate before the Intervention Law entered into force, such income shall not be returned to the debtor.
• The Intervention Law suspends enforcement conducted under the Claim Enforcement and Security Act, however the suspension shall not apply if the enforcement concerns an urgent matter in which the courts are deciding also during the COVID-19 epidemic, or if the enforcement is based on a claim for legal alimony and damages for lost alimony due to the death of the alimony provider.
• Tax enforcement conducted under the Tax Procedure Act shall be suspended from 11 April 2020.

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 (i) 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 or (ii) in any case when a company (irrespective of its activity) was not insolvent as of 31 December 2019. 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. The above mentioned exclusion of the management obligation to file for commencement of compulsory settlement or bankruptcy shall not apply, if there is no prospect that the company will be able to cure the insolvency, even if the company’s insolvency occurred as a consequence of declaration of the COVID-19 epidemic.
• 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 (i) 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 or (ii) in any case when a company (irrespective of its activity) was not insolvent as of 31 December 2019. The debtor may also justify the postponement of deliberation on the creditor’s proposal, if it supplies evidence which shows that it has cured the insolvency by other means of financial restructuring or through sufficient scope of business activities. This measure shall be used in any bankruptcy procedure upon the creditor’s application which the creditor files no later than three months after the measures under the Intervention Law cease to apply. If the court postpones its deliberation on the creditor’s proposal for initiation of bankruptcy procedure, the enforcement court shall, upon debtor’s proposal, also suspend enforcement against the debtor.
• 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 the measures under the Intervention Law cease to apply and 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 (Zakon o javnem naročanju) 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

• 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 validity of the security agreement which secures the extended loan agreement shall also be extended correspondingly to the extension of the loan agreement. The borrower must submit the application for moratorium no later than six months after the revocation of the COVID-19 epidemic announcement.

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.
• The above exception shall apply also to brokerage companies, investment funds selling their own units in Slovenia, and mutual pension fund managers when executing the following transactions: entering into a business relationship with a client, any transaction above EUR 15,000, or an occasional transfer of funds which exceeds EUR 1,000. The same applies to transactions where there is doubt as to the credibility or adequacy of the obtained information. The information must be obtained before the execution of the transaction and only in respect of transactions which are conducted on the basis of an existing business relationship.

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 declare that they have been affected by the crisis, will receive a monthly basic income of EUR 350 in March and EUR 700 in each of April and May 2020. The condition to receive the monthly basic income is that the self-employed individual must make a statement that due to the COVID-19 epidemic, their income in 2020 will be more than 10% lower as compared to their income in 2019. At the time of making such statement the self-employed individual should be free of tax debt. Intervention Law foresees special conditions in order to ensure that also self-employed individuals who did not operate the entire year 2019 or 2020 can receive the monthly basic income. If the COVID-19 epidemic will be prolonged by another 30 days after 30 May 2020, self-employed individuals will also be entitled to receive a monthly basic income for the month of June.
• A self-employed individual who has not yet made the statement to take advantage of the monthly basic income, may do so within eight days after the amendments to the Intervention Law enter into force; the statements can therefore be filed by 9 May 2020 (considering that 9 May is a Saturday, we advise that all statements are duly submitted no later than on 8 May).
• The monthly basic income shall be excluded from payments of all taxes and contributions.
• Self-employed individuals shall be exempted from all compulsory social security contributions from 13 March 2020 until 31 May 2020 (or for additional 30 days, if the COVID-19 epidemic announcement is not revoked by 15 May 2020). Also here the above described condition of 10% lower income in 2020 applies, otherwise the individual will have to return the received contributions. During this period, the contributions for the self-employed will be borne by the state and their rights will be preserved.
• Until 31 May 2020 self-employed individuals shall be exempted from advance payment of personal income tax on income from the performance of activities for 2020.
• All of the above described measures foreseen under the Intervention Law for the self-employed will be applicable from 13 March 2020.

Vouchers issued by tourist agencies

• If the agreement on a travel package is not performed due to exceptional circumstances caused by the COVID-19 epidemic, the organizer may instead of returning all payments also: (i) issue a transferrable voucher in the amount of all payments made by the consumer or (ii) if the consumer does not agree to a voucher, return payments only within 12 months after the COVID-19 epidemic notice has been revoked. The voucher shall be usable for the same or a different tourist package within 24 months after it is issued and if the consumer does not use the voucher in the said 24 months, it may request the organizer to pay back the amount of the voucher. The organizer shall guarantee for the voucher with all its assets.

No Contributions for National Television in hospitality and retail sectors

• Legal entities active in the hospitality and retail sectors shall be exempted from contributions for the national television from 13 March 2020 to 31 May 2020.

With respect to labour law measures which we are separately discussing here, it is important to note that the Intervention Law prohibits any dividend distributions, share repurchases, payments for business performance to the management and/or bonuses to the management in the year 2020 or for the year 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) exemption from payment of contributions for workers sent to wait for work at home; and / or (iii) monthly basic income for the self-employed.  There shall be no obligation to return such support if payments for business performance are made to employees other than the management. It should be noted that until the amendment the Intervention law regulated the above payments (and some other payment) differently, which we discussed in our previous post on the Intervention Law

The changes introduced by the amendment will not apply retroactively, but only following the entry into force of the amendment (1 May 2020). Repayment of funds received between 11 April 2020 and 1 May 2020, will likely continue to be governed by the original provisions of the Intervention Law. It is not clear how the different provisions will be applied in practice and could depend on the circumstances of a particular situation.