Fixed cost grant from Corona Assistance Fund resources
In order to cushion the economic effects of the COVID-19 crisis the Austrian Federal Government has put together an aid package of EUR 38 billion, which also feeds the Corona Assistance Fund endowed with EUR 15 billion. On 25 May 2020, the long-awaited ordinance (including the directive in the annex) on the grant of subsidies to cover fixed costs was published in the Federal Law Gazette (BGBl. II No. 225/2020). Below you will find a brief overview of the conditions for the granting of fixed cost subsidies in FAQ form.
Who awards the fixed cost grant?
Grants to cover fixed costs (fixed cost grants) are awarded and paid out by the COVID-19 Finanzierungsagentur des Bundes GmbH ("COFAG"). In this context, COFAG has to take in consideration the Ordinance of the Federal Ministry of Finance pursuant to Sec 3b of the Federal Act Incorporating a Federal Divestment (Public Limited) Company (ABBAG-Gesetz) regarding guidelines on the awarding of grants to cover fixed costs by the COVID-19 Finanzierungsagentur des Bundes GmbH (COFAG), in particular the extensive Guidelines in its annex.
Who can be awarded a grant?
An applicant must suffer a loss of revenue (as defined in the Guidelines) due to the spread of COVID-19 and must cumulatively meet the following requirements:
- seat or permanent establishment in Austria.
- operational activity in Austria that results in income pursuant to Sec 21, 22 or 23 of the Austrian Income Tax Act 1988 (Einkommensteuergesetz 1988).
- the company has not been affected by the prohibition of deduction under section 12 para 1 no 10 of the Austrian Corporation Tax Act 1988 (Körperschaftsteuergesetz 1988) in the last three years assessed (no aggressive tax planning) and no final criminal fine (except for financial irregularities [Finanzordnungswidrigkeiten]) for wilful conduct has been imposed on the company in the last five years prior to the application.
- the company was not already in difficulty* within the meaning of Article 2 No 18 of Regulation (EU) No 651/2014, General Block Exemption Regulation (GBER) on 31 December 2019. Even a company in difficulty may benefit from the fixed cost grant provided the company is not insolvent (i.e. not subject to insolvency proceedings, insolvency requirements are not fulfilled) at the time of application. However, the fixed cost grant to the company in difficulty must remain within the de-minimis range as set out in Regulation (EU) No. 1407/2013 (total amount of de minimis aid shall not exceed of EUR 200.000 over any period of three fiscal years; aggregation within a group of companies).
* A company is "in difficulty" if one of the following criteria is fulfilled
a. more than half of the subscribed share capital (in the case of corporations) or (ii) of the equity capital shown in the books (in the case of partnerships) has disappeared as a result of accumulated losses
b. the requirements for the opening of insolvency proceedings (inability to pay, over-indebtedness) are met or the company is subject to insolvency proceedings.
c. if company is beneficiary of rescue aid: the loan has not yet been repaid or the guarantee has not yet expired; if company is beneficiary of restructuring aid: the restructuring plan is still in progress.
d. in the case of large enterprises, for the last two years: (i) the undertaking's book debt to equity ratio has been greater than 7,5 and (ii) the undertaking's EBITDA interest coverage ratio has been below 1,0.
- reasonable measures were taken to reduce the fixed costs to be covered by the grant (duty to mitigate losses from an ex ante perspective).
Furthermore, the applicant must not be excluded from receiving fixed cost grants.
Who is excluded from receiving fixed cost grants?
The following entities are not eligible for fixed cost grants:
- legal entities in the financial sector (e.g. credit institutions, insurance companies, investment firms and investment service providers) which are registered or licensed in Austria, a Member State (Sec 2 para 5 Austrian Banking Act, Federal Law Gazette No 532/1993 – “ABA”) or a third country (Sec 2 para 8 ABA) and which are subject to prudential supervisory provisions with regard to their activities.
- entities which are fully owned (directly or indirectly) by the State and other bodies governed by public law.
- entities majority owned (directly or indirectly) by the State and other bodies governed by public law and having an equity ratio of less than 75%.
- enterprises with more than 250 employees measured in full-time equivalents as of 31 December 2019 (large enterprises) and that have dismissed more than 3% of their employees during the period under review instead of using short-time work (exception in the case of a justified request under certain circumstances).
- recipients of payments from the non-profit organizations support fund.
- Newly established companies which have not generated revenues before 16 March 2020.
Confirmations to be made by the applicant
The applicant must – in addition to the above criteria – confirm that
- the fixed costs indicated in the application do not include any expenses for the repayment of existing financial liabilities (with exceptions) or for investments or are financed indirectly by the fixed cost grant.
- the fixed costs are not additionally covered by private measures (e.g. insurance) or state measures in connection with the COVID-19 crisis. As far as legally possible, the remuneration (of the company owner or the executive bodies, employees and significant vicarious agents) was calculated in such a way that no inappropriate remuneration, remuneration components or other benefits are paid to them; in particular in 2020, no bonus payments will be paid to members of the management board or managing directors in excess of 50% of their bonus payment for the previous financial year.
- it is acknowledged that the fixed cost grant awarded to him is recorded in the transparency database.
What additional obligations must the applicant fulfil?
The applicant must also undertake
- to pay particular attention to the preservation of jobs in his company and to take all measures to generate turnover and to preserve jobs (e.g. by means of short-time working).
- to adapt withdrawals by the owner of the company or the distribution of profits to owners in the period from 16 March 2020 to 31 December 2021 to the economic conditions. In particular, the following events in the period from 16 March 2020 to 16 March 2021 hinder a fixed cost grant: (i) the release of reserves to increase the balance sheet profit, (ii) the distribution of dividends or other legally non-mandatory distributions of profit, (iii) the repurchase of own shares. Accordingly, until 31 December 2021 only a measured disbursal of dividends or profits is allowed.
- to provide COFAG (as well as the Ministry of Finance and other authorised representatives) with information at any time or to grant access to relevant documents, receipts and records.
- to comply with the data protection requirements as defined in the Guidelines.
- to notify COFAG immediately of any changes in the circumstances relevant to the awarding of the grant.
How and until when may the fixed cost grant be applied for?
The application must be made exclusively to COFAG and submitted via FinanzOnline. The application period has started on 20 May 2020.
As a rule, the application must be submitted by a tax consultant, auditor or accountant; they must also confirm in the application the amount of loss of revenue and fixed costs (exceptions in case of application for lower grants).
What are fixed costs?
Fixed costs are expenses arising from domestic operational business activities which are incurred in the period from 16 March 2020 to 15 September 2020 and fall under one or more of the following items:
- rent and lease of business premises directly related to the business activity of the company.
- operating insurance premiums.
- interest expenses on credits or loans, provided that these have not been passed on to affiliated companies as credits or loans.
- the financing cost component of the leasing instalments.
- royalties, provided that the receiving entity does not directly or indirectly belong to a group or is not under the controlling influence of the same shareholder.
- expenses for electricity, gas and telecommunications.
- loss of value of perishable or seasonal goods, provided that they lose at least 50% of their value due to the COVID 19 crisis.
- an appropriate entrepreneurial remuneration in case company is subject to income tax according to criteria defined in the Guidelines.
- personnel expenses incurred exclusively for processing cancellations and transfers due to the crisis.
- For companies applying for a grant not exceeding EUR 12,000: appropriate costs for tax consultants, auditors or accountants up to a maximum of EUR 500.
- expenses for other contractual operational payment obligations not relating to personnel.
Insurance benefits that cover these fixed costs in the event of an insured event are to be deducted from the fixed costs.
How is the amount of the grant calculated?
The fixed cost grant is determined on the basis of the amount of loss. In this context, the revenues from goods and/or services, which are decisive for income or corporation tax assessment, are to be taken into account.
The applicant may choose the calculation method for the loss of revenues:
- quarterly comparison (Q2/2019 to Q2/2020) or
- continuous period of three months (whereby the 16th of a month until the 15th of the following month forms a "period under review") in comparison to the respective period of the previous year.
The fixed costs are determined on the basis of the calculation method selected
- for quarterly comparison: fixed costs between 16 March and 15 June 2020.
- for three-month period: fixed costs in the selected period.
The fixed cost grant is only awarded if its total amount exceeds EUR 500. The following scheme applies:
Loss of revenue
Grant (maximum amount)*
40 – 60%
25% (max EUR 30 mill.)
> 60 – 80%
50% (max EUR 60 mill.)
> 80 – 100%
75% (max EUR 90 mill.)
*The maximum amount is only granted once per group of companies. The maximum amount is based on the group company with the highest loss of revenues.
By choosing the optimal calculation method the applicant may influence the amount of loss of revenues / fixed costs. Payment is usually made in three tranches after the application has been approved. The Guidelines foresee detailed rules on the amount of the respective tranche, the application and payment deadlines and the evidence to be provided by the applicant.
Does other public aid have to be taken into account?
Yes, grants from the State that are made in connection with the COVID 19 crisis and the associated economic damage (e.g. compensation under the Federal Epidemic Act) are to be taken in account. Payments from the Hardship Fund (Härtefallfonds) and short-time working allowances (Sec 37b para 7) AMSG) are not taken into account.
Is there a legal entitlement to a fixed cost grant?
No (Sec 3b para 2 of the ABBAG-Gesetz). COFAG must, however, proceed in accordance with the Guidelines.
The tax authorities are involved in the assessment. The tax authorities assess the information and data on which the application is based on the basis of an automated risk analysis including a plausibility check. This applies in particular to the indicated amount of lost revenues and fixed costs. The result of the assessment is forwarded to COFAG.
COFAG must justify to the applicant any decision deviating from the application.
The COFAG supervisory board must approve fixed cost grants in excess of EUR 800,000.
Are grants reviewed ex-post?
Yes, such review is usually carried out by the tax office responsible for levying VAT when an external tax audit (Sec 147 para 1 Federal Tax Code, Bundesabgabenordnung – “BAO”)), inspection (Sec 144 BAO) or accompanying control (Sec 153a BAO) is carried out. On the instruction of the Federal Ministry of Finance, the competent tax office must carry out an ad hoc audit. Overpayment may be reclaimed.
In the case of grants above EUR 10 million, an ex post case-by-case assessment must be carried out, in particular by examining the net loss (actual damage), in order to avoid overcompensation of the damage actually suffered. For grants of up to EUR 10 million, similar audits on a sample basis are foreseen. This requirement was added at the last minute due to the decision of the European Commission.
An application contrary to the facts may constitute a criminal offence (misuse of subsidies).
Did the fixed cost grant have to be to be designed in conformity with EU state aid law?
Yes. The European Commission approved the aid scheme described above by decision of 23 May 2020, SA.57291(2020/N). The published text of the decision shows that the Republic of Austria had to improve its original compensation scheme (especially with regard to disbursement in instalments and an ex-post control system to verify that no beneficiary is overcompensated).
Please note: This blog merely provides general information and does not constitute legal advice of any kind from Binder Grösswang Rechtsanwälte GmbH. The blog cannot replace individual legal consultation. Binder Grösswang Rechtsanwälte GmbH assumes no liability whatsoever for the content and correctness of the blog.