COVID-19 Countermeasures in Austria

Special corona short-time working model:

• Short-time work is the temporary reduction of normal working hours and, as a consequence, the reduction of the remuneration due to economic difficulties. The purpose is to temporarily reduce labour costs while maintaining the workforce.
• The rules for social security contributions in the above sectors have been amended as follows:

• Employee must, at the employer's request, consume the holiday credit of previous years as well as existing time credits in their entirety.
• As a second step, a business may make use of the Corona short-time work. In this case, employees continue to receive a certain salary-based percentage of their gross salary, this is however divided between the employer and the Austrian AMS (Labour Market Service) in a way that the employer continues to pay the employee a given percentage of his or her net remuneration (80-90%), but is reimbursed by the Austrian AMS for the amount by which the remuneration exceeds the equivalent of the actual working hours which were agreed upon.
• Should the employer and the employee agree upon a reduction of his or her working hours to 10% and should the employee receive, scaled according to his or her previous net salary, 90% of his or her previous income level, then the employer would be liable for 10% of the gross salary and the Austrian AMS for 80% of the gross salary.
• The employer is also granted reimbursement for the proportionate employer´s social security contributions.

Measures taken by the Austrian Health Insurance Service (ÖGK)

• Outstanding contributions will not be reminded.
• An automatic deferral is granted if the contributions are not paid in, only partially paid in or not paid in time.
• Informal instalment payments will be accepted.
• No recovery measures will be imposed.
• No insolvency applications will be filed.

Companies are requested to continue to register for compulsory insurance in due time before the start of work; delays caused by coronary conditions can be made without penalty upon request. The monthly contribution base notifications are still to be sent to ÖGK on the usual dates.

These measures will apply until further notice, but probably at least for the contribution periods February, March and April 2020.

1. Advance payments of income or corporation tax for 2020

1.1. Income or corporation tax prepayments for 2020 can be reduced or set at EUR 0,00
Taxpayers affected by a loss of income due to the SARS-CoV-2 Virus may apply for a reduction in advance payments of income or corporation tax for the calendar year of 2020 until 31 October 2020. In this application, the taxpayer must provide credible evidence of the probable reduction in the tax base based on the specific nature of the problem. The request can be made via “FinanzOnline”. A sample form is provided for taxpayers who do not have access to “FinanzOnline”. The tax authorities are to reduce the advance payments for 2020 accordingly. If it is likely that there will  be no income or corporation tax liability for the calendar year 2020, the tax authorities must set the advance payments for the calendar year 2020 at EUR 0,00. Such applications must be processed immediately.

1.2 No assessment of income or corporation tax prepayments for 2020 under specific circumstances
Insofar as income or corporation tax prepayments for the calendar year 2020 are not already set at EUR 0,00, the prepayment is to be reduced to the amount that is expected for the calendar year 2020. If the taxpayer is affected in terms of liquidity by the consequences of the emergency situation caused by the SARS-CoV-2 Virus in such a way that he or she cannot pay the advance payment, he or she can suggest to his tax office that the income tax or corporation tax advance payments for the calendar year 2020 should not be determined in their entirety or assessed with an amount that is lower than the anticipated annual tax for 2020, even at EUR 0,00. This is subject to the condition that the taxpayer provides credible evidence of the actual impact of the liquidity emergency caused by the SARS-CoV-2 Virus. Such suggestions must be dealt with immediately by the tax authorities.

2. Collection of taxes

2.1. Deferral and instalment of payments
The taxpayer can apply to the competent tax authority to postpone the payment of taxes (deferral) or to grant payment in instalments. The application must substantiate the impact on the taxpayer's situation. When processing the application, the tax office must take into account the special situation that has arisen in the individual case due to the occurrence of the SARS-CoV-2 Virus. The application must again be processed immediately by the tax authorities.

2.2. Deferral interest
The taxpayer can suggest to the competent tax authority (e.g. in the application for deferral or payment by instalments) to refrain from assessing deferral interest. The taxpayer's concrete involvement must be substantiated. If this is the case, the tax office must comply with the suggestion and reduce the deferral interest to an amount down to EUR 0,00. The suggestion must be processed at the same time as the application for deferral or payment by instalments is processed.

2.3.Late payment penalty
The taxpayer can apply to the competent tax authority to reduce or not to set a late payment penalty. In the application, the taxpayer's concrete concern must be substantiated. When processing the taxpayer's application for a reduction or non-determination of a late payment penalty, the tax office must assume that there is no gross negligence in the delay if the taxpayer has credibly demonstrated that he is actually affected.

Corona Crisis Fund - measures in the area of liquidity

The requirements for the application are that the company is an Austrian company with significant operational activity in Austria and that there is a need for liquidity in Austria. In addition, there might be a restriction on the payment of dividends and bonuses to executives (max. 50% of the bonuses of the previous year). Furthermore, the company must of course be affected by the Corona crisis.

Prior to applying for the Corona Crisis Fund companies must endeavor to apply for measures such as the instalments of payments, the instalments of tax payments as well as special corona short-time working measures.

Settlement will be effected via the financing house bank. In addition, the credit will be limited with an interest burden of a maximum of 1%.

• Corona Crisis Fund - measures in the area of cost coverage
  
  

Guarantees for companies affected by COVID-19

For guarantees, the Corona relief fund provides federal guarantees of 80 to 100% of the credit volume from COFAG. The basic prerequisite is that healthy Austrian companies have run into liquidity bottlenecks due to COVID-19.

Guarantees are provided by the following institutions for the following entrepreneurs:

• AWS – Guarantees for KMU, EPU, self-employed, agricultural enterprises
• OEKB - Guarantees for large enterprises
• ÖHT - Guarantees for the tourism and leisure industry

Processing is always carried out via the respective house bank.

Not eligible for guarantee are fisheries, aquaculture, primary production of agricultural products, coal industry, shipbuilding, steel industry, synthetic fibre industry, banks and other financing, insurance, real estate (property developers as well as renting and leasing), associations, local authorities and legal entities in which local authorities have a stake of more than 50% (directly or indirectly), as well as companies which, in relation to the project, violate the War Material Act, the Security Control Act and other Austrian legal provisions which are punishable by law.

Financing: The AMS confirmation of approval of short-time work is accepted by the banks as security for working capital loans. Repayment is then made from the short-time work compensation paid by the AMS.

Consequences:

• No dividend payout: For public limited companies, it is a prerequisite that bonuses are only distributed to management board members up to 50 % of last year's bonuses and that no dividend payments from 16.3.2020 - 16.3.2021 may be made or financed from this liquidity assistance. (Note: i.e. dividends are apparently not generally prohibited, but as it is difficult to prove what they were financed from, they are probably de facto excluded for this period);
• Financing ban: Not eligible for financing are rescheduling of loans, investments or dividend payments from 16.3.2020 - 16.3.2021, bonuses to Management Board members (limited to a maximum of up to 50 % of the previous year) and share buybacks.

Fixed cost subsidies for companies affected by COVID-19

Companies suffering from revenue losses due to the spread of COVID-19 in the period from 16th of March 2020 till the 15th of September 2020 will benefit from financial measures in the form of subsidies to cover fixed costs. The Austrian Government issued a directive regulating these financial measures.

The use of these measures shall be made accessible by means of an application which may be submitted as early as the 20th of May 2020. Applications for these measures shall be submitted no later than 31 August 2021.

In order to be eligible for grants covering fixed costs, a company must be a beneficiary company as defined in point 3.1 of the directive. Grants are therefore only handed out to companies which cumulatively meet the following conditions:

• the company has its registered office or a permanent establishment in Austria;
• the company carries out a substantial operational activity in Austria, which generates income in accordance with section 21, 22 or 23 of the Austrian Income Tax Act;
• the company has not engaged in aggressive tax planning in the last three years and has not been subject to a legally binding financial penalty;
• the company suffers a loss of turnover caused by the spread of COVID-19 within the meaning of point 4.2 of the directive;
• the company was not in difficulty on the 31st of December 2019 (Article 2(18) of Commission Regulation (EU) No 651/2014 - General Block Exemption Regulation); the company has taken reasonable measures to reduce the fixed costs to be covered by the fixed cost subsidy (duty to mitigate damage by means of ex ante consideration).

Excluded from the granting of subsidies are supervised legal entities in the financial sector which meet certain criteria, including particular credit institutions and insurance companies, institutions that are solely owned by local authorities or institutions that are majority-owned by local authorities and have an equity ratio of less than 75%, as well as companies that had more than 250 employees as of the 31st of December 2019 and dismissed more than 3% of their employees during the period under review. The granting of subsidies is also blocked if payments have been received from the non-profit organisation support fund.

The Directive covers those fixed costs arising from domestic operating activities and which incur in the period from the 16th of March 2020 till the 15th of September 2020 and which fall under one of the expense items referred to in point 4.1.1 of the Directive. Expense items according to point 4.1.1 of the Directive include expenses from renting and leasing business premises, operating insurance premiums, interest expenses, electricity/gas/telecommunications expenses and certain personnel expenses.

In order to calculate the amount of loss of turnover, it is necessary to take into account the revenues from goods and/or services that are decisive for the assessment of income tax or corporate income tax. For this purpose, the figures of the 2nd quarter of the year 2020 are to be compared with those of the 2nd quarter of the year 2019. In order to determine the fixed cost subsidy, the fixed costs between the 16th of March 2020 and the 15th of June 2020 are to be used as the assessment basis. In deviation from this quarterly consideration, a shorter consideration period of one month may also be regarded as the assessment basis. However, applications in this context may only be submitted for a maximum of three months of observation. The fixed costs incurred in the respective period are then to be used as the basis for assessment.

According to the respective amount of loss of sales, fixed costs are reimbursed as follows, provided that the total fixed cost subsidy amounts to at least EUR 2,000:

• 25% with a loss of sales of 40 to 60%
• 50% with a loss of sales of 60 to 80%
• 75% with a loss of sales of 80 to 100%

The fixed cost subsidy is limited for each company with:

• EUR 90 million with a subsidy of 75% of fixed costs
• EUR 60 million with a subsidy of 50% of fixed costs
• EUR 30 million with a subsidy of 25% of fixed costs

If several applicant companies are affiliated within a group, the maximum amount is only granted once for all companies within the group. The maximum amount is based on the company in the group that has the highest loss of sales.

Grants handed out may be paid in subsequent instalments, depending on the application:

a. The first tranche may comprise a maximum of 1/3 of the expected fixed cost subsidy and may be applied for by the 20th of May 2020;

b. The second tranche may additionally comprise a maximum of 1/3, i.e. a total of no more than 2/3, of the anticipated fixed cost subsidy and may be applied for by the 19th of August 2020;

c. The third tranche may be applied for by the 19th of November 2020.

It should be noted that when applying for a grant above a certain value limit, the application must be certified by a tax consultant, auditor or accountant. If the grant applied for in the first tranche does not exceed EUR 12,000, this confirmation may be omitted altogether. If the grant applied for exceeds EUR 12,000 but is no higher than EUR 90,000, the confirmation may be limited to a confirmation of plausibility.

The applicant must confirm in the application his compliance with certain criteria by agreeing to a declaration of commitment. This declaration of commitment includes, in addition to the consideration of job preservation, the obligation to adjust withdrawals by the owner of the enterprise or to adjust the distribution of profits to owners to the economic circumstances. The directive expressly states in this respect that the decision to pay dividends and profits from the 16th of March 2020 until the 16th of March 2021 is forbidden. It also expressly states that a moderate dividend and profit payment policy must be adhered to until three months after payment of the fixed cost subsidy. Furthermore, the directive states that no reserves may be released to increase the balance sheet profit and that the fixed cost subsidy may not be used to pay out profit distributions, buy back own shares or pay bonuses to members of the Board of Management or managing directors.

Hardship Fund - measures in the area of cost coverage

• Micro-entrepreneurs as natural persons who employ fewer than 10 full-time equivalents and have a turnover or balance sheet total of no more than EUR 2 million are entitled to apply. GmbHs do not come into the benefit of the hardship case fund!
• In addition, working partners who are compulsorily insured in accordance with GSVG/FSVG have been included.
• Economically significant threat must be proven.
• Within a second phase the contributions will range up to EUR 2.000 for a maximum of 3 months. The grant from phase 1 will however be credited against the calculated grant in phase 2. The subsidy from phase 1 was therefore to be regarded merely as a first injection of liquidity.
  • The lower and upper income limits of Phase 1 are not applicable (lower limit - EUR 5,527.92 p.a.; upper limit - EUR 60,144.00 p.a.)
  • Income from pension insurance is no longer a reason for exclusion. Remuneration is credited as additional income when calculating the subsidy.
  • Additional income is now generally permissible and is no longer a reason for exclusion. However, the payments are also taken into account as additional income when calculating the subsidy.
  • Multiple insurances in health and/or pension insurance are now permitted. Voluntary insurance is now also sufficient to meet the requirements
  • Now also company founders who founded between 01.01.2020 and 15.03.2020 are eligible to apply. They receive a lump sum of EUR 500 per month.

Implications regarding the issue of rental payments:

Implications regarding the issue of rental payments: The Austrian ABGB provides for clauses (§§1104 and 1105, as well as § 1096) from which it can be deducted, that the landlord bears the risk that a business premise cannot be used due to extraordinary coincidences. The tenant of a business premise may therefore - depending on the degree of the restriction - be entitled to a rent reduction (up to the complete loss of rent). This applies to all rents for business premises, regardless of whether the Austrian Tenant Fees Act (MRG) is applicable or not. Of course, the circumstances of the individual case and the specific contract must be taken into account, as contracts may include a provision due to which the liability for such extraordinary circumstances is distributed differently.  

Possible restriction on the distribution of profits:

Possible restriction on the distribution of profits: Austrian Parliamentarians are currently discussing the possible emplacement of a payout block on profit distributions for periods in which a company makes use in particular of measures under labour law, social security law, company law or tax law or of support funds or subsidies due to the COVID-19 crisis.  As of now no further information is available to these measures and to the exact extent of such a payout block. Nor is there any information on the exact timeframe of these measures. However, a distribution of profits before the new provisions enter into force cannot be affected by these measures.

Gift Tax and Inheritance Tax:

Gift Tax and Inheritance Tax: As a consequence of the COVID-19 crisis, the Austrian Government already announced talks on introducing a gift and inheritance tax into the Austrian Tax System which may be required to counteract the financial crisis following the humanitarian crisis.