On Thursday, March 19, the Cabinet of Ministers (CoM) ratified a special fixed-term draft law prepared by the Ministry of Finance on the measures for preventing and overcoming the national threat and the consequences thereof related to the spread of COVID-19. The purpose of the draft law is to set measures for preventing and overcoming the national threat and the consequences thereof, special support mechanisms, as well as crisis expenditure directly related to financing the containment of the spread of COVID-19. The regulation will take effect as of March 12, when the state of emergency has been declared in the State.

 The Minister for Finance, Jānis Reirs, emphasises: "We have provided for particular measures for mitigating the consequences of crisis, in order to immediately and specifically support the enterprises and sectors most affected by the crisis and to provide support to all enterprises and their employees. The situation is developing and changing at a fast pace. Such circumstances do not allow for any procrastination; therefore we have provided for the possibility of urgently reacting and immediately supplementing the support possibilities, whenever necessary".

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The law states that the CoM shall define the sectors facing considerable deterioration in their financial situation amid the spread of COVID-19 (crisis affected sectors) and which thus qualify for the application of measures and special support mechanisms. The CoM can review and supplement the list of the crisis-affected sectors.

The law provides that the taxpayer in the crisis-affected sectors is entitled to apply for the extension of the tax payment term. The extension of the term can also be asked for those overdue tax payments, the payment term whereof has been extended in accordance with the law On Taxes and Duties, provided that the delay has occurred as a result of COVID-19. The taxpayer submits a motivated application not later than within two months from the due payment term or the day of the law’s coming into effect. Tax administration is entitled to reschedule or postpone the performance of the delayed tax payments for a period of up to three years, counting from the day of submission of the application. The delayed tax payment, for the performance whereof the extension of the tax payment term is granted, is not subject to calculation of late interest.

If the employer in the crisis-affected sectors is not employing the employee or, alternatively, is on idle time (does not carry out the activities required for accepting the performance of the obligation of the employee), employee remuneration is compensated under the procedure and in the amount specified by the CoM, comprising up to 75% of the remuneration specified in the Labour Law but not exceeding 700 euros per calendar month. The idle time benefit is not subject to PIT and the mandatory state social security contribution.

State and local government authorities, as well as capital companies, for the period of validity of the law, release the economic operators in crisis-affected sectors from their rent or resolve upon a reduction of the rent. It will also be possible not to impose late interest and contractual penalties in case of overdue payments, except for on those paid for consumed services and utilities - electricity, thermal energy, water supply, and other property maintenance services.

The law also provides for the support measures to be applied irrespective of the sector.

The law allows for the personal income tax (PIT) payer not to perform the specified PIT advance payments from the operational income for the taxation year 2020. This condition is applicable to advance payments starting from 1 January 2020. These payments may be performed on a voluntary basis.

For the period from 1 April to 31 December 2020, the procedure for the refunding of overpaid value added tax (VAT) is prescribed by this law. It is planned that the State Revenue Service (the SRS), when taking tax administration measures, performs the overpaid VAT amount refund within a shorter term than the one provided by the effective VAT Law, thus raising available funds for overcoming the crisis caused by COVID-19 virus.

This year, as well as in 2021, 2022 and 2023, the SRS is entitled not to adopt a negative decision with respect to the in-depth cooperation program participant, if it has been affected by the COVID-19 crisis and if the in-depth cooperation program participant provides evidence on the presence of objective circumstances.

Up to 1 September 2020, during the state of emergency, the management board of a capital company, cooperative company or association is entitled to convene a meeting of shareholders (stockholders) or a general meeting of members, stipulating that the shareholders (stockholders) or members are entitled to participate and vote therein via electronic means. It will also be possible to hold a meeting of shareholders (stockholders) or general meeting of members only in electronic form. The draft law also provides for the procedure under which it is possible for the shareholders (stockholders) to express their attitude in writing.

The subjects of the Law on the Annual Financial Statements and Consolidated Financial Statements, as well as associations, foundations, and religious organisations, will be entitled to submit the annual statement (consolidated annual statement, if required) for the year 2019 later than the term specified by legal framework (correspondingly, by 3 or 4 months).

During the state of emergency caused by COVID-19, the alcohol used for producing alcohol-containing disinfectants may be non-denatured. The SRS may grant to the economic operators which have a special permit (licence) for the activities of an approved warehousekeeper and for performing the production of alcohol an excise duty security reduction of up to 90%. These economic operators, via Electronic Declaration System, must inform the SRS on the commencement of the alcohol production process not later than one business day before the commencement of the alcohol production process. In turn, where the manufacturer of the disinfectant, based on the permit issued by the SRS for the acquisition of alcoholic beverages, will itself import or receive alcohol from another Member State, an excise duty security reduction in the amount of 100% is applied.

In 2020, the local governments are entitled to set the real estate tax payment terms differently than those specified in the law On Real Estate Tax, postponing them within the scope of 2020. The local government can exercise these rights both by adopting the decision on all taxpayers and by setting certain categories of taxpayers. The decision must be publicly communicated to the taxpayers by local governments.

The possibility is provided for increasing reserve capital for the State Development Finance Institution Altum, allowing entrepreneurs to use the support mechanisms - loan guarantees, as well as loans for crisis resolution. 

Guarantee conditions (in the program there is a possibility to provide support in the amount of 100 million euro per each 10-15-million-euro risk coverage):

Enterprises to be supported - small and medium-sized merchants, large enterprises; Has not been failing prior to the COVID-19 crisis; Guarantee amount of up to 50%; Maximum amount of the guarantee up to 5 million euro per enterprise; Maximum term of the guarantee is up to 2 years; Guarantee is issued for existing liabilities (investment loans, financial leases) by the credit institution’s postponing the payments of the principal amount for up to two years; Guarantee may also be issued for the current assets’ loan for up to three years (by both the enterprise’s undertaking new liabilities and by restructuring the existing current assets’ loan granted by the credit institution).

Loan conditions for solution of the crisis (in the program there is a possibility to provide support in the amount of about 100 million euro per each 25-million-euro risk coverage):

Enterprises to be supported - small and medium-sized merchants, large enterprises; Has not been failing prior to the COVID-19 crisis; Loan for financing new current assets; Maximum amount up to 1 million euro per enterprise; Maximum term is up to 3 years; Grace period of the principal amount is up to 12 months; Collateral requirements are considerably reduced; Reduced/subsidised % rate.

The draft law incorporates also the issues in the field of the Ministry of Justice regarding delays in civil liabilities. It also includes the budget flexibility conditions, in order to expediently solve the issue on granting funds in the crisis-affected sectors.

The draft law has been passed to the Saeima (Parliament) for urgent review.

The government supports entrepreneurs and the employed; therefore, it continues to analyse and discuss, in a twenty-four-hour mode, other new types of support, so as to, as far as possible, preserve the functioning of the economic environment and to expediently help it fully recover and return to its normal operation.