Countries across Europe are persistent in their efforts to tackle the economic impact of COVID-19, while also laying the foundation for future stability. For those who are members of the EU, the European Commission has committed to working with its member states to ensure the timely implementation of national financial support measures and incentives.
Several programs in Europe are designed to shore up the cash-flow constraints that many private companies are suddenly facing. These mirror similar measures that are being ushered in throughout the world. Tax deferrals are common, as are VAT rate reductions, wage subsidies, and increased business-loan facilities.
At the time of writing, the following examples of business-relief programs were being introduced in countries across Europe.
At the time of publishing, Austria had not announced its economic relief program. However, all signs point to the creation of several newly established catastrophe funds for Austrian businesses affected by the virus. These funds are not expected to be subject to corporate income tax.
Payroll tax and labor market contributions have been deferred by 4 months. The EU recently announced its approval of a special compensation fund to pay for the costs incurred by organizers of events that had to be cancelled between 6 March 2020 and 31 March 2020.
France has implemented extensive financial measures to support French companies that have been heavily affected by COVID-19. These include deferral of social security contributions and taxes, as well as the temporary suspension of water, gas, electricity, and rent charges for private businesses.
The German government ministries and a state bank have introduced a special plan to save companies from bankruptcy due to COVID-19. In order to encourage banks to make low-interest commercial loans to struggling companies, the KfW, Germany’s state-owned bank, is offering to cover up to 90 percent of risk, with no limit on the funds available for the guarantee. The plan is open to all business that were not encountering financial difficulties as of 31 December 2019.
Additional economic support programs have been proposed and are awaiting the European Commission’s approval. In the interim, tax deferral options and pre-payment reductions are being introduced to improve companies’ cash-flow positions.
As businesses in Ireland seek new ways to bolster their companies amid difficult trading conditions, interest charges have been suspended for late VAT payments for January and February 2020 and Pay As You Earn (PAYE) liabilities for February and March have been suspended. All Irish Revenue debt reinforcement has been suspended until further notice. The current tax clearance status will remain in place for all businesses.
Tax filings have been deferred to 30 June 2020 for companies in tourism, sport, entertainment, art, culture, education, transport, food, and not-for-profit. Tax credits up to €20,000 are also being introduced for costs related to sanitization efforts.
The government has announced that businesses facing liquidity problems as a result of the virus are eligible to apply for a deferral of their VAT, personal and corporate income tax, and payroll taxes. Additional cash-flow relief is provided through a 3-month deferral of VAT, as well as personal and corporate income tax payments and payroll taxes.
Those businesses that expect to experience a year-over-year decline in sales of at least 20 percent have access to an emergency fund to cover a portion of their salary costs. Additionally, businesses that were forced to close temporarily may be eligible for a compensation payment of €4,000. Guarantee levels are being increased for several government-guaranteed loan schemes for small and medium businesses.
Spain has introduced an option for deferral of small, past-due state-level tax debts including VAT tax withholdings, excise taxes, and corporate income tax. Eligible businesses will be granted a 6-month deferral, with no late-payment interest accruing for the first 3 months.
An additional proposal under consideration would provide small and medium-sized businesses with government-guaranteed credit to mitigate revenue loss, particularly for those in the tourism industry.
A short-term leave subsidy will be provided whereby employers can receive approximately 90 percent of the salary costs for employees who took short-term leave due to COVID-19. The government will also pay the full amount of all sick-pay costs incurred in April and May 2020.
In an effort to mitigate potential business failures, Switzerland has allocated CHF10 billion to support companies that have been directly affected by the pandemic. This includes up to CHF580 million in bank loans with surety bond guarantees for small and medium-sized businesses.
New guaranteed, government-backed, low-cost loans are being made available to businesses to support the liquidity requirements of large enterprises. With the introduction of a new Business Interruption Loan Scheme small and medium-sized business, will have access to loans of up to £5 million, with no interest due for the first 6 months.
A COVID-19 job retention scheme is being implemented whereby government grants will cover 80 percent of the salary of retained workers, up to a total of £2,500 per month. The scheme will be open to any employer in the country for a minimum of 3 months to cover the cost of wages backdated to 1 March 2020. There is currently no limit on the funding that will be available.
In addition, enhancements are being made to measures that were previously announced. For example, the interest-free period for the Coronavirus Business Interruption Loan Scheme has been increased to 12 months; next-quarter VAT payments have been deferred to mid-June; and businesses will have until the end of the financial year to submit payments. Grants for businesses that are eligible for the Small Business Rate Relief have been increased to £10,000.
We at KPMG Private Enterprise understand the potential consequences of the current global health situation for private companies. I encourage you to follow our regular series of blog posts to stay informed about how COVID-19 may affect your business strategy and operations, and to reach out to KPMG Private Enterprise advisers in your country or territory for their guidance.
Please visit the COVID-19 KPMG Private Enterprise website for details of the economic relief programs available for private businesses across the globe.
Please visit the KPMG website for our business overview and action checklist titled “Understanding the Implications of COVID-19 for private companies” (PDF 382 KB) and our guide to robust business continuity planning titled “Leading successfully in turbulent times.” (PDF 616 KB)