On April 3, 2020, the Austrian federal government announced an expansion of support measures for Austrian companies as part of the Corona Aid Fund (“Corona Hilfsfonds”) with 15 billion euros being available.
The Corona Aid Fund provides companies, which are facing significant sales declines caused by the current Corona crisis, with a grant for their fixed costs up to a maximum of 90 million Euro per comapny. Additionally, the new EU state aid regulations made it possible as of April 4,2020, to assume state guarantees up to 100-percent for emergency loans of up to EUR 800,000 for SMEs.
Additionally the current Corona crisis again outlines, how important the R&D tax credit is for companies located in Austria. The R&D tax credit can be a highly useful instrument to bring urgently needed liquidity to companies if prepared with a professional and efficient approach.
The Corona Aid Fund constitutes of a fixed cost grant and a loan guarantee by the Austrian federal government:
As for the grant for the fixed costs, companies with a decline in turnover of at least 40% caused by the Corona crisis af may apply for a non-repayable cash grant for their fixed costs amounting up to 90 million after the end of their fiscal year, irrespective if the the loan guarantee is also applied for. Contrary to initial announcements, the grant for fixed costs is not limited to certain industries, if there is at least a 40% decline in turnover and if the following requirements are met:
- Site and operational business activities in Austria
- Applying companies must have been healthy before the Covid-19 crisis
- All reasonable measures for reducing fixed costs and maintaining jobs in Austria have been taken for being eligible for the grant
- For larger companies (more than 250 employees), evaluation whether all reasonable measures to preserve jobs (e.g. Corona short-time work) have been taken.
The grant for fixed costs can be used for necessary contractual payment obligations (which could not be deferred or reduced), such as rent, licensing costs, payments for electricity, gas, internet, telephone, insurance, interest and expenses for seasonal or perishable goods with a decline in value by at least 50% during the Crisis. An entrepreneur’s salary of up to 2,000 Euro per month can also be considered.
The grant for fixed costs is staggered and depends on the loss of sales caused by the current Covid-9 crisis. If 2,000 euro are exceeded within 3 months, the federal government of Austria will provide the following allowances as a cash grant:
- 40 – 60% decline of turnover: 25% allowance as a grant for fixed costs
- 60 – 80% decline of turnover: 50% allowance as a grant for fixed costs
- 80 – 100% decline of turnover: 75% allowance as a grant for fixed costs
The application for the grant for fixed costs is divided in two phases. In phase 1, companies have to register via Austria Wirtschaftsservice (aws) starting April 15, 2020 until December 31, 2020. In phase 2, the submission of the complete application for the grant for fixed costs has to be filed after the end of the respective fiscal year by 31.08.2021 at the latest.
The application has to include a description of the actually incurred fixed costs and the actual decline in sales. Before filing the application, the information must be confirmed by a tax advisor or auditor. Payment is made after the tax adviser or auditor has ascertained the damage, i.e. after the end of the financial year and submission of the confirmation.
Decisive for the application is the presentation of the fixed costs as well as a reason why they could not be reduced. Together with the required confirmations from a tax advisor or auditor, we may assist already at an early stage in order to correctly determine and present them, but securing that actually all eligible fixed costs are captured with the application.
The guarantee under the Corona Aid Fund secures 90% of the loan amount, covering the company’s actual financial needs. Loan amounts are secured with an upper limit of the lower of last three month turnovers or max. 120 million euro (interest rate max. 1% plus liability-margin of 0.25-2%). Support for the Corona Aid Fund guarantee may only be requested by the company’s bank directly as of April 8, 2020 onwards, whereby the liquidity requirement must be plausibly presented when submitting the application. The guaranty period amounts to 6 months to 5 years, whereby an extension of up to 5 years is possible.
The essential prerequisites for this state guarantee under the Corona Aid Fund are:
- Site and business activity in Austria
- Liquidity requirements for the Austrian site
- In case of public corporations (ie “Aktiengeslelschften”), bonuses to board members may only be distributed up to 50% of last year’s bonuses and no dividend payments may be made under this liquidity aid between March 16, 2020 and March 16, 2021.
Refinancing of existing debt, investments or dividend payments between March 16, 2020 and March 16, 2021, bonuses to board members (limited to a maximum of up to 50% of the previous year) and share buybacks are not eligible for funding.
COFAG (Covid-19 Financing Agency) together with AWS, ÖHT and OeKB manages the Corona Aid Fund. An application is only possible via the company’s bank, which has to submit the application directly. Depending on the company’s business and size, the application is forwarded to Österreichische Kontrollbank (for large companies), to Austria Wirtschaftsservice GmbH (for small and medium-sized enterprises) or to Österreichische Hotel- und Tourismusbank GmbH (tourism companies). Through these three funding agencies, COFAG issues credit guarantees for loans granted by banks to the applying companies.
In addition, in the current situation it again has to be highlighted the importance of the R&D tax credit being a very efficient and targeted option to generate additional liquidity for companies if the application is made in a professional and prompt approach.
The R&D tax credit amounts to 14% of the relevant expenses for research and development, whereby R&D-relevant CAPEX can also be taken into account with the (proportional) acquisition costs. The R&D tax credit is an actual cash grant without a cap for in-house research and development (up to 140,000 euro for subcontracted research), which means that can be considered as an actual liquidity aid for companies performing R&D activities.
To apply for the R&D tax credit, no basic research is required, but R&D work covered in the Frascati Manual (e.g. feasibility studies, analyzes, prototype development, etc.). The R&D tax credit is granted regardless of the company’s economic situation and can serve as an essential liquidation support for companies in loss situations, especially since the R&D tax credit is not tied to any particular use by the taxpayer. By a timely application for the R&D tax credit and a high quality application, a swift payment of the R&D tax credit may be achieved in order to be able to quickly obtain the often required liquidity.
In the current crisis the R&D tax credit constitutes a highly efficient and targeted measure to additionaly required liquidity. Therefore, our recommendation is to apply for the R&D tax credit shortly rather than postponing the application to alter periods, since the R&D tax credit may als be applied for before any tax return is prepared or filed. For a timely and also high quality application we may offer our support via an efficient and streamlined preparation process based our extensive knowledge in order to achieve the granting of the R&D tax credit in a fast and uncomplicated process for obtaining additional liquidity in advance.
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