May 28, 2020
Austria implements fixed-cost subsidy to mitigate impact of COVID-19
In order to support the recovery of the Austrian economy from the impacts of COVID-19, the Austrian Federal Government will provide a fixed-cost subsidy as an aid measure within the framework of the Corona Aid Fund. On 23 May 2020, the European Commission approved the fixed cost subsidy in a total amount of €8 billion (IP/20/928) after an examination of European Union (EU) State aid rules. On 25 May 2020, the Austrian Federal Ministry of Finance published the adapted Directive (Fixkostenzuschuss Richtlinie) in the Austrian Federal Gazette (BGBl. II No. 225/2020).
The basic requirement for a fixed-cost subsidy is the loss of sales in a specific period due to COVID-19 of at least 40% compared to 2019. Entities can receive subsidies of up to 75% of fixed costs. Actual fixed costs incurred in 2020 are the basis to calculate the subsidy. An advance payment of up to 50% of the total amount requested is possible. Authorities announced that the first payments will be made within 10 days upon application.
Loss of sales, calculation of fixed cost subsidy
For the calculation of the loss of sales, top-line sales as declared in the income tax/corporate income tax return are relevant. Sales of the second quarter of 2020 (1 April to 30 June 2020) must be compared to sales of the second quarter of 2019 to calculate the loss of sales.
As an alternative to the observation period of second quarter of 2020, up to three connected monthly observation periods may be chosen for the period of 16 March 2020 to 15 September 2020:
Fixed-cost subsidies of the follow percentages will be granted:
The fixed cost subsidy is limited per entity to:
If several affiliated entities submit applications, the maximum amount is only available once.
The fixed-cost subsidy is reduced by grants from local authorities in connection with COVID-19 and compensations under the Epidemic Act. There is no reduction for payments relating to Corona short-time work.
A fixed-cost subsidy is granted only to entities that meet the following conditions cumulatively:
No fixed-cost subsidies are granted to:
Definition of fixed costs
Fixed costs are exclusively expenses arising from an operating domestic activity for the period from 16 March 2020 to 15 September 2020, provided that they fall into at least one of the following categories:
Depreciation of fixed assets is not part of a fixed-cost subsidy.
Application and payment
The application for a fixed-cost subsidy must be filed with COFAG (special entity set up by the Austrian Federal Ministry of Finance to process COVID-19 subsidies) via FinanzOnline (electronic filing system of the Austrian tax authorities) and must be submitted between 20 May 2020 and 31 August 2021. A disbursement in installments may be requested.
The first tranche does not yet consider the value losses of seasonal goods and tax advisor costs. The disbursement of the third tranche requires qualified accounting data. If they are available in due time, the third installment can be requested as early as the second.
The application for a fixed-cost subsidy must include a presentation of the estimated or actual loss of sales and fixed costs in the relevant period.
For subsidies exceeding €90,000, the amount of the loss of sales and the fixed costs has to be confirmed by a tax advisor or public accountant and the application needs to be filed by a tax advisor or public accountant. If the entire subsidy does not exceed €12,000, then the application does not have to be filed by a tax advisor or public accountant. If the entire subsidy is between €12,000 and €90,000, then the confirmation of the tax advisor or public accountant may be limited to confirmation of plausibility.
At the request of COFAG and the tax authorities, the applicant must provide further information necessary for the examination of the application, as well as documents and confirmations. In addition, the applicant must confirm that all prerequisites for obtaining a subsidy are fulfilled.
The applicant must also undertake to provide all information at the request of the competent authorities, to grant the competent authorities the right of examination and inspection at any time and to notify them without delay if relevant circumstances change.
Decision on applications
Applications are examined by COFAG and the subsidy is paid out after approval. In the case of a fixed-cost subsidy exceeding €800,000.00, the approval of the supervisory board of COFAG is required.
Fixed-cost subsidies are granted on the basis of a private law agreement. There is no legal entitlement to the granting of fixed-cost subsidies.
Subsequent verification and repayment
The subsequent review of fixed-cost subsidies is carried out by the tax authorities. In any event, in the case of subsidies over €10 million, an ex-post case-by-case assessment must be carried out, in particular the net loss (actual damage) will be examined in order to avoid overcompensation of the damage. For subsidies of up to €10 million, similar checks are foreseen on a sample basis.
COFAG shall claim back fixed-cost subsidies in so far as it is later apparent that the conditions underlying the subsidy do not correspond to the actual circumstances. Abuse of subsidies entails criminal law consequences.
More information can be found at the following link in German:
The overall framework for subsidies to cover fixed costs is €8 billion and it has been approved by the European Commission. As noted, there is no legal entitlement to a fixed-cost subsidy. Due to the cap on the total amount, entities should promptly address the issue of fixed-cost subsidies and process the necessary data. As many unanswered questions remain, further clarifications can be expected.
For additional information with respect to this Alert, please contact the following:
Ernst & Young Steuerberatungsgesellschaft m.b.H., Vienna