Member Article

I Banking and Finance

The Government of Latvia has approved a business support program that provides for financial measures ensured in cooperation with state development agency Altum. The program is planned to continue until mid-2021. Depending on individual needs, companies, regardless of industry, can use six crisis alleviation programs:

• Working capital loan – a liquidity support for companies, whose activities have been affected by Covid-19.
• Credit holiday guarantee – companies that have experienced objective difficulties in making loan payments to banks due to the spread of Covid-19, can receive a credit guarantee that will allow the bank to defer payment of the principal amount.
• Aid to exporters – restrictions on receiving export guarantees to the EU and certain OECD member states have been lifted by 31.12.2020 – export guarantees for export to developed countries, regardless of the export turnover and the country to which the transactions are planned.
• Guarantee for large companies – viable businesses that need financing to restore, maintain and promote competitiveness and increase turnover, including exports, due to the outbreak of Covid-19. Support can be received by large companies, for investment loan; loan for financing current assets, including credit limit (revolving credit facilities and overdrafts); financial leasing, financing leasing limits, for the term of 6 or 8 years.
• Capital fund – funding can be received by large companies whose operations were adversely affected by Covid-19, as well as those large companies that are ready to adapt their current business model to the new realities of life and business environment. Funding will be available to companies that create added value for the national economy of Latvia (operate in high value-added industries, employ a large number of people and make high mandatory social insurance contributions and personal income tax payments to the government budget, innovate and produce innovative products)
• Loans for large and medium-size businesses – for the purpose of maintaining and increasing exports and competitiveness, as well as for implementation of viable projects (up to EUR 15 million for a term of up to 20 years).

II Labour and Employment

Support for the wage subsidy for entrepreneurs will be available at the rate of 50% of the declared average monthly gross wage for the period from 1 August to 31 October 2020, but not more than in the amount of 500 euros per calendar month per an employee. The employer is obliged to pay the employee the difference between the amount of support received and the amount of salary, thus ensuring that the employee will receive 100% compensation. The support will be paid to employees.

A working capital subsidy for businesses will be available at the rate of 30% of the total gross salary of the company, for which payroll taxes were paid in August, September and October 2020, but not more than EUR 50,000 for the support period and not more than EUR 800,000 per related group of persons.

Aid to compensate for idle time is paid to the employee at the rate of 70% of the declared average monthly gross salary for the period from 1 August to 30 October 2020. For an employee of a micro-enterprise taxpayer – at the rate of 50% of the average monthly gross salary in a micro-enterprise for the third quarter of 2020. Amount of support – not less than 330 EUR and not more than 1000 EUR per calendar month.

Sickness benefits for workers fallen ill with Covid-19 or in quarantine between 16 November 2020 and 30 June 2021 are to be paid by the state from the first day of incapacity to work at the rate of 80% of the average insurance salary of the worker.

III Tax

• Upon applying till 30 December 2020, entrepreneurs affected by the Covid-19 crisis will be able to receive an extension or payment-by-instalment period for up to three years. The taxpayer will have to submit a substantiated application regarding the necessity to pay by instalments or extend the term within 15 days after the due date of payment. No arrears will be calculated for this overdue tax payment, while information about the company will not be included in the database of tax debtors administered by the SRS.
• A provision has also been maintained, which envisages that advance payments of personal income tax may not be made in 2020. In turn, donors have retained the favourable opportunities to make donations in 2020 to help overcome and prevent the consequences of COVID-19.
• Until the end of 2020, the SRS will continue to ensure the refund of the approved overpaid amount of the value added tax (VAT) in a shorter term than the one provided by the current VAT law. As a result, businesses will have more free financial resources to deal with the crisis.
• In 2020, 2021, 2022 and 2023, the SRS will not exclude from the Advanced Cooperation Program or reduce the level of the program for those participants of the Advanced Cooperation Program who have been affected by the financial consequences of the spread of the virus. At the same time, the Program Participant will need to provide evidence that the objective circumstances are due to the effects of the spread of Covid‑19.
  
  

IV Other

Funding for employee training has been increased to help entrepreneurs adapt to market conditions following the Covid-19 crisis. Within the framework of the program, it is planned to provide additional training support to at least 2000 employees of 500 companies.

It has been decided to reimburse 80% of the ticket value to all organizers of public events, including cultural events, regardless of their legal status, for events cancelled during the state of emergency and reimbursed to spectators. To receive the compensation, event organizers will have to apply to the State Cultural Capital Fund.

Real Estate

Government and municipal authorities, as well as derivative public persons and capital companies controlled by a public person, shall release the business entities, associations and foundations of sectors affected by the crisis from the rent of the property of the public person or property of the capital company controlled by the public person, or shall resolve on reduction of the rent and on use of the property of the public person, as well as shall not impose default interest and contractual penalties in case of late payment, save for money for services consumed (utilities) and other services for maintenance of the property until 31 December 2020. In case the leased property is not used for the performance of the economic activity at all during the specific period due to the decisions passed by the Cabinet of Ministers aimed at curtailing the COVID-19 pandemic, then the rent should be waived.

In light of the above in order to claim release of the rent payments certain criteria must be met, inter alia, the company may not have outstanding tax debts exceeding EUR 1000 and the company’s turnover must have dropped by at least 30%. Conversely, in other cases, the rent may be reduced by up to 90% of the established rent, if the set criteria are met.

Support for companies in the tourism sector and exporting companies

EUR4,746,290 shall be allocated for the support of hotels to cover operating costs, incl. payment of employees' salaries, utility bills and various other payments. Funds will be available after the approval of support in the European Commission. Indicatively, applications will be accepted from late November or early December 2020.