Measures to prevent liquidity problems arising from COVID-19

A bundle of measures should help companies through liquidity constraints during the Corona crisis. A crisis management fund and a hardship fund were set up for this purpose. In addition, there is support from the Austrian Wind-Down Management Company (Abbaumanagementgesellschaft, ABBAG) as well as relief in tax law and in insolvency and execution law.

In order to support the Austrian economy during the Corona crisis, the Federal Government has announced further support packages following the emergency aid package of EUR 4 billion adopted in mid-March, with which a total of up to EUR 38 billion is to be made available. The steps to support the Austrian economy are aimed particularly at relieving companies in the event of liquidity problems.

Crisis Management Fund

With the entry into force of the COVID-19 Act (COVID-19 Gesetz) on 16 March 2020, a COVID-19 Fund Act (COVID-19-Fondsgesetz) was created, which as a first measure provides a COVID-19 crisis management fund with currently 28 billion euros. The COVID-19 Crisis Management Fund has been set up and is administered by the Minister of Finance.

The COVID-19-FondsG provides that the financial resources of the fund can be used for the following measures, among others:

  • Measures to stimulate the labor market (in particular short-time work, but also support programs of the Austrian Labor Market Service (Arbeitsmarktservice, AMS))
  • Measures to cushion the loss of income due to the crisis
  • Measures to revive the economy
  • Measures to stabilize liquidity

According to the legislative materials, the latter can be done through economic stimulus packages or by expanding existing support programs (such as the AWS, FFG, ÖHT).

The guidelines for the handling of the Fund’s resources were laid down by decree by the Minister of Finance. The Minister of Finance, in agreement with the Vice-Chancellor, decides on the actual disbursement of the financial resources to the budget management bodies entitled to receive them. According to the legislative materials on the COVID-19 Fund Act, this is intended to ensure a holistically coordinated approach in connection with the management of the crisis.

The COVID 19 crisis management fund was provisionally established until the end of 2020. However, the legislative materials hold out the prospect that provisions will be made in the 2021 budget if the crisis is not “completely overcome” by then.

Hardship Fund

With the 2nd COVID-19 Act (2.COVID-19-Gesetz), a hardship fund law was created. This law describes the hardship fund as a “federal support program for the hardship fund”, which serves to provide a safety net for hardship cases in one-person companies (Ein-Personen-Unternehmen, EPU), freelancers (freie Dienstnehmer) according to § 4 (4) General Law on Social Security (Allgemeines Sozialversicherungsgesetz, ASVG), non-profit organizations (NPO) according to §§ 34 to 47 of the Federal Fiscal Code (Bundesabgabenordnung, BAO) and micro-enterprises caused by the legal and economic consequences of COVID-19. Entitled to claim are also private room lessors of private guest rooms in their own household with a maximum of 10 beds, which are not subject to the Trade Regulation Act 1994 (Gewerbeordnung 1994).

The aid is provided in the form of a grant.

The program is managed by the Austrian Federal Economic Chamber (Wirtschaftskammer) and – insofar as agricultural and forestry enterprises and private accommodation providers are concerned – by Agrarmarkt Austria (AMA) in the transferred area of activity in accordance with the instructions of the Vice-Chancellor, the Minister of Economics, the Minister of Agriculture and the Minister of Finance.

The application can be submitted via the WKO service platform or the AMA’s Internet service portal.

Funds of up to two billion euros will be made available from the COVID-19 crisis management fund. The guidelines for handling the hardship fund are to be issued by the Minister of Finance in agreement with the Vice-Chancellor and the Minister of Economics or the Minister of Agriculture.

In accordance with the funding guidelines, this is a non-repayable grant as partial compensation for lost income from self-employment and from commercial enterprises that have been significantly affected by the COVID-19 crisis.

For a grant applicant to be “affected by an economically significant threat from COVID-19” within the meaning of the funding regulations, it must be ascertained that

  • he is no longer able to cover his running costs, or
  • he is affected by an officially ordered ban on entry due to COVID-19, or
  • there is a drop in sales of at least 50% compared to the same month of the previous year. For companies that have been in existence for less than one year at the time of application, the planning calculation is to be used.

The amount (the “extent”) of funding is set out in the funding guidelines as follows:
Grant applicants who have a tax assessment notice (EStG 1988 or KStG 1988), at least for the tax year 2017 or later, receive

  • for a net income of less than EUR 6,000 p.a. a subsidy of EUR 500
  • for a net income of EUR 6,000 p.a. or more, a subsidy ofEUR 1,000

Grant applicants who meet the eligibility requirements of the Directive and do not have a tax assessment certificate shall receive a grant of EUR 500.

Support from the ABBAG

The Austrian Wind-Down Management Company (ABBAG), which was founded in 2014, was previously involved in the sale of shares and property rights held by the Federal Government and the ABBAG in dismantling companies and certain credit institutions and insurance companies in financial difficulties. The COVID-19 Act amends the ABBAG Act (ABBAG-Gesetz) and now also assigns ABBAG tasks to support companies in the context of the Corona crisis.

The amendment of the ABBAG Act extends the scope of the company’s activities. According to the newly inserted No. 7 of § 2 (2) ABBAG Act, the company is now also responsible for “providing services and taking financial measures in favor of companies pursuant to § 3b (1) which are necessary to maintain the solvency and bridge liquidity difficulties of these companies in connection with the spread of the SARS-CoV-2 pathogen and the economic effects caused by it”.

§ 3b (1) ABBAG Act is also new and provides that financial measures pursuant to § 2 ( 2 ) No. 7 may only be taken in favor of companies which have their registered office or a permanent establishment in Austria and carry out their main operational activities in Austria.

Furthermore, the law expressly states that there is no legal claim to the granting of financial measures (§ 3b (2) ABBAG Act).

The Minister of Finance is responsible for issuing directives by decree, in compliance with the applicable provisions of EU state aid law, which contain the following provisions:

  • Definition of the group of eligible companies,
  • Form and purpose of the financial measures,
  • The amount of the financial measures,
  • The duration of the financial measures,
  • Rights of information and access of the Federal Government or the authorized representative.

With the 3rd COVID-19 Act, the ABBAG Act was again amended and it was stated that an ABBAG subsidiary was established to provide the services and financial measures, namely the COVID-19 Financing Agency of the Federal Republic of Austria GmbH (COVID-19 Finanzierungsagentur des Bundes GmbH, COFAG).  The 3rd COVID-19 Act contains an obligation on the part of the federal government to endow COFAG with up to 15 billion euros.

The guidelines concerning the further details of the granting of financial support were laid down in a decree of the Minister of Finance or its Annex.  According to this decree, support can be granted to companies that have their registered office (or permanent establishment) in Austria and carry out significant operational activities in Austria. While the financial measures of COFAG in principle include direct grants as well as guarantees and direct loans, the present guidelines only regulate the last two measures.

In order to take into account the requirements of EU state aid law, the guidelines refer to the COVID-19 Communication on state aid of the European Commission both with regard to the amount and the duration of the measures.  The amount of the measure is measured there on the basis of different ratios; the applicable guarantee fees and interest charges also vary depending on the form of the specific measure.

Applications for the granting of guarantees must be submitted by the company via the credit institution which grants the underlying loan to the company, i.e. the company’s principal bank. For SMEs, the AWS processes the application, for larger companies the OeKB.

Relief in tax law

The Federal Ministry of Finance (BMF) has published “extended special regulations concerning coronavirus”, in which a number of tax relief measures are described that are intended to improve the liquidity of companies. With the help of a “combined application for special regulations concerning coronavirus (SR 1-CoV)” available on the Internet, which can be sent by e-mail to corona@bmf.gv.at or entered in FinanzOnline under “Sonstige Services/Sonstige Anbringen” (Other Services/Other Attachments). Applications can also be submitted via the FinanzOnline functions “VZ-Herabsetzung” (pre-payment reduction) or “Zahlungserleichterungen” (payment facilitation).

The special arrangements provide for the following relief regarding tax assessment:

  • Reduction of advance payments of income or corporation tax
  • Non-imposition of advance payments of income or corporation tax
  • Abstention from fixing recovery interest

Regarding the collection of taxes, the following can be requested:

  • Deferral and payment in installments
  • Non-imposition of deferral interest
  • Cancellation of late payment surcharges already set

In addition, the “extended special regulation” provides that the deadline for annual returns for income tax, corporation tax, turnover tax and the determination of income in general is extended until 31 August 2020. In addition, it is generally to be refrained from setting late surcharges in accordance with § 135 BAO if the failure to meet the deadline occurs before 1 September 2020.

The 2nd COVID-19 Act stipulates that in the calendar months of March, April and May 2020 no insolvency applications are to be filed for non-payment of social security contributions already due and no contributions due are to be collected (new § 733 of the General Law on Social Security). The periods may be extended by the Minister of Health by up to three calendar months (contribution periods) if the coronavirus pandemic continues.

Relief in insolvency and execution law

In principle, the debtor must apply for the opening of insolvency proceedings without culpable delay, but no later than 60 days after the occurrence of insolvency (§ 69 (2) Insolvency Code, (Insolvenzordnung, IO)). By way of exception, this period is extended to 120 days pursuant to § 69 (2a) IO, namely in the event of a natural disaster (flood, avalanche, snow pressure, landslide, landslide, hurricane, earthquake or similar disaster of comparable magnitude).

The 2nd COVID-19 Act now adds “epidemic, pandemic” as further examples to extend the deadline in these cases as well. As the accompanying legislative materials explain, this regulation applies not only in the event of insolvency but also in the event of over-indebtedness (§ 67 (2) IO).

It is now also clarified under execution law that COVID-19 is treated as an “epidemic, pandemic” like a natural disaster: According to § 200b (1) of the Execution Code (Exekutionsordnung, EO), the execution is to be postponed upon application by the obligor without the imposition of a security deposit if

  • the obligor has been affected by a natural disaster,
  • he has thereby fallen into economic difficulties which have led to the initiation of the execution,
  • and this execution would destroy his economic existence
  • and there is no danger that the creditor is seriously damaged by it, in particular that his claim could become wholly or partially irrecoverable.

It should be noted that, unlike many other COVID-19 measures, these amendments to insolvency and execution law were introduced without a later expiry date being set. As things stand at present, these changes concerning epidemics or pandemics will therefore continue to apply in the future.