The Spanish Government has recently issued four relevant rules concerning impact of COVID-19.
Royal Decree-Law 15/2020 of 21st April (RD-L 15) on urgent supplementary measures to support the economy and employment, Royal Decree Law 16/2020 of 28th April (RD-L 16) on procedural and organisational measures to deal with COVID-19 issues on the administration of justice, insolvency measures, employment measures, Royal Decree-Law 17/2020 of 5th May (RD-L 17) on measures for the cultural sector and specific tax measures, and Royal Decree-Law 18/2020 of 12th May (RD-L 18)on social measures in defence of employment.
In the present update, we will focus on the most relevant measures issued by these four rules:
A) Royal Decree-Law 15/2020.
Article 1 establishes that the lessees of rental contracts for use other than housing, in which the lessor is a company or public housing entity or a “large holder” (individual or legal entity that owns more than 10 urban properties, excluding garages and storage rooms, or a constructed surface area of more than 1.500 m2), may request the application of a moratorium on the payment of rent, the lessor being obliged to accept it.
Article 2 establishes a different regime for those tenants who cannot benefit from the specific measure provided for in Article 1 because the lessor does not meet the characteristics set out in that article. Specifically, that tenants can only “request” from the lessor “the temporary and exceptional postponement of the payment of rent”.
In both cases (Article 1 and 2) the following requirement must be meet by the lessee (self-employed or Small companies): the activity has been suspended due to the state of alert, or, in any case, the reduction of its invoicing for the calendar month prior to that which the postponement is requested by at least 75% in relation to the average monthly invoicing for the quarter to which that month of the previous year belongs is accredited.
VAT: Supplies of goods, imports ant intra-Community acquisitions of certain health products listed in the Annex to RD-L 15 are subject to the zero rate. Digital books, newspapers and magazines, which until now have been taxed at 21%, are subject to the 4% rate according to the requirements stated in the RD-L 15.
Corporate Tax: Companies whose volume of operations in 2019 does not exceed 600.000.-€ may opt to make the instalment payments according to Article 40.3 of the Corporate Income Tax Act, on the part of the tax base for the three, nine or eleven month period in the year 2020.
Taxpayers whose net turnover is more than 600.000.-€ but less than 6.000.000.-€, who cannot benefit from the extension of the period for filing returns for the first quarter, may opt for modality of Article 40.3 within the deadline for making the second instalment payment and can apply the same method in the third instalment. The instalment payment corresponding to the first period may be deducted from the remaining payment of the same year.
b) Royal Decree Law 16/2020
RD-L 16 includes a wide range of organizational and procedural measures, within the framework of the Administration of Justice, and in view of the de-escalation plan presented by the Government and the gradual return to the activity of courts and tribunals after the confinement, in the fundamental interest of avoiding a collapse of the administration of justice, after the lifting of the suspension of deadlines and procedural actions imposed by the declaration of the State of Alert.
The challenge of the ERTE for economic, technical, organizational and productive causes in the context of Covid-19, will be dealt with by the procedural modality of the collective conflict.
Creditors and refinancing agreements measures: RD-L16 estates three specific measures:
Deferral of the duty to submit the application for competition and limitations on the applications for competition required: Article 11 eliminates, in general, the duty to request the declaration of bankruptcy. Specifically, that article prevents the judges from admitting for processing, until 31st December 2020, those applications that have been submitted after the declaration of the state of alert.
Suspension of the cause for dissolution due to losses under Article 363.1 e) of the Law on Corporations (LSC): Losses for the year 2020 will not be taken into consideration for the sole purpose of determining the reason of the cause for dissolution provided for in Article 363.1 e) of the revised text of the LSC. If the result for the 2021 financial year shows losses that reduce the net assets to less than half the share capital, the directors must call a meeting or any shareholders may request, within a period of two months from the end of the financial year, that a meeting be held to proceed with the dissolution of the company, unless the capital is increased or reduced to a sufficient extend to provide enough accountant solvency.
c) Royal Decree Law 17/2020
RD-L 17 approves support measures for the cultural sector and of a tax nature to deal with the economic and social impact of the COVID-19, seeks to alleviate the situation in which the virus crisis has left the performing arts and music sector, having been forced to cancel or reschedule the events that were planned for this year 2020.
d) Royal Decree Law 18/2020
RD-L 18 was published the 12th May being its main aim to facilitate the progressive reactivation of the economy, through the activation of those sectors whose activity continues to be limited by health restrictions derived, among other situations, from the containment measures agreed within the framework of the state of alert.
Specifically, RD-L 18 establishes employment measures in relation to the procedures for the for the suspension of contracts and reduction of working hours (“ERTE”) due to force majeure and economic, technical, organizational or production causes (“ETOP”) regulated by Royal Decree Law 8/2020 of 17th March:
ERTE due to force majeure: is extended to 30 June 2020 for business with approved applications that cannot resume activity for reasons of force majeure. In these cases, the relief is continued for employers from making social security contributions accrued in May and June 2020 and contributions for quotes to be jointly collected: full relief for companies with fewer than 50 employees and 75% relief for those with 50 or more.
Scheme on partial force majeure is regulated: Authorized schemes for force majeure will apply partially, up tp 30 June 2020, to companies that signed up to it and are partly able to resume business. These companies will need to start bringing employees back to work as necessary, with measures for short-time working taking priority.
For employees that return to work, the social security relief will be 85% of the employer contributions accrued in May and 70% of that in June (companies with fewer than 50 employees at 29th February 2020). Companies with 50 or more employees will receive relief of 60% of the employer contributions accrued in May and 45% in June.
In respect of employees who remain without working, where the subsidised scheme is used partially, the relief will be 60% of the employer contributions accrued in May and 45% in June (companies with less than 50 employees) and 45% of employer contributions accrued in May and 30% in June (companies with 50 or more employees)
Obligation to keep employees in their jobs for six months after business resumes: On Royal Decree Law 8/2020, the government announced that companies applying for ERTE-Force Majeure would have to maintain jobs for six months after employees return to work. RD-L 18 clarifies that the obligation will not be considered as breached where contracts are ended due to dismissal for disciplinary reasons, death, retirement, disability, etc. Employers will also not be in breach if they do not call up workers on rolling seasonal contracts, where this is just a hiatus and they are not dismissed. In cases of temporary contracts, these will not be considered as breached when terminated because they hace come to the end of the agreed duration or of the contracted job or service, or where it is not immediately possible to carry out the activity.
This obligation will also not apply to companies that are at risk of insolvency.
Companies registered in tax havens: That companies cannot benefit from the extension of the ERTE due to force majeure.
Restriction on the payment of dividends: Companies applying ERTE due to force majeure cannot pay dividends for the year in which they use the scheme, except it the y repay the relevant portion of social security contributions on which they received relief.
Daniel Aroca, Auren Spain