As we have informed you in our previous Tax News, the Austrian Ministry of Finance has issued several measures to support companies affected by the current Covid-19 pandemic. Just recently the Ministry of Finance published the funding guidelines for the long time announced cash grant for fixed costs. This grant applies to companies with an operating business or site in Austria with a significant decline in sales due to the Covid-19 pandemic. The corresponding funding guidelines can be found under following link.
For a first overview, we briefly summarized the essential points below, since the measure can provide a very interesting opportunity and direct support for many companies in the currently difficult situation.
Depending on the decline in sales in the period under observation compared to the same period of the previous year, a cash grant may be granted partially covering the fixed costs incurred. The period under observation can either be the second quarter of 2020 (compared to the second quarter of 2019) or a monthly analysis of the following 6 defined monthly periods under review (comparison period would be the corresponding period 2019). In case of a monthly review, an application can cover a maximum of 3 of these monthly periods, which must be directly connected to each other time wise (point 4.2 of the guideline):
- Period 1: March 16, 2020 to April 15, 2020
- Period 2: April 16, 2020 to May 15, 2020
- Period 3: May 16, 2020 to June 15, 2020
- Period 4: June 16, 2020 to July 15, 2020
- Period 5: July 16, 2020 to August 15, 2020
- Period 6: August 16, 2020 to September 15, 2020
The cash grant for fixed costs depends on the decline in sales in the chosen period under observation, which is caused due to the current Covid-19 pandemic and calculates as follows (point 4.3 of the guideline):
|Decline in sales||Allowance||absolute cap|
|40% – 60%||25% of fixed costs||EUR 30 Mio|
|60% – 80%||50% of fixed costs||EUR 60 Mio|
|exceeding 80%||75% of fixed costs||EUR 90 Mio|
Generally, the decline in sales and the application for a cash grant have to be considered per company; only the absolute cap for the cash grant (with 75% allowance EUR 90 mio) must be considered for all Austrian affiliated companies and permanent establishments. The cap for the cash grant to be applied depends on the company with the heaviest decline in sales.
The definition of eligible fixed costs, which is to be used as a basis for the cash grant, is governed by point 4.1 of the funding guidelines and for instance includes rental expenses for business locations, insurance payments, royalties and interest payments to non-affiliated companies, payments for electricity, gas, telecommunications and expenses for seasonal or perishable goods. An entrepreneur’s salary of up to EUR 2,666.67 per month can also be considered by individual persons.
Restrictions for the application and on eligible companies exist if the company has been subject to an add-back according to Sec 12 para 1 no 10 CIT Act, ie denying the deductibility of interest and royalty payments to related parties in case of low taxation, or if a legally binding financial crime fine was imposed for intentional misconduct within the last five years. For large companies (with more than 250 employees), no more than 3% of the employees may have been dismissed (exception only possible on request). Additionally, the applying company obliges itself to limit bonus payments for board members/managing directors to 50% of last years bonus payments. In addition, dividend resolutions or profit withdrawals between March 16, 2020 and March 16, 2021 are prohibited.
As the funds available for the cash grant for fixed costs are limited, we recommend filing an application as soon as possible after the application is open on 20 May 2020. Generally, the payout of the cash grant is planned in three tranches, whereby an application for the first tranche can be filed as of 20 May 2020 (the second as of 19 August 2020 and the third as of 19 November 2020). The application for the first (and for the second) tranche can be based on bestestimates of the fixed costs and the expected decline in sales based on sales figures in accordance with the Austrian VAT Act. To file the application, a tax advisor or auditor must confirm the figures on decline in sales and the figures of fixed costs. We are happy to assist you in preparing and submitting the relevant applications and in carrying out the required calculations. If you are interested in applying for the cash grant for fixed cost and would like us to support you in that process, we would kindly ask for prompt feedback.
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