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Covid-19: Incentive measures

Covid-19 crisis in Lithuania

Incentive measures proposed by the Government of the Republic of Lithuania that will come into force once required amendments in legal acts are approved by the Parliament

UPDATED: 2020, May 14

In order to reduce the economic impact of COVID-19, the state has set up a Business Support Fund, which should help ensure the liquidity of small and medium-sized enterprises, their access to finance and their faster recovery from the crisis.


The Fund will be operated by two newly established state-owned companies: the private limited company “Valstybinis investicinis kapitalas“ (managed by the Ministry of Economy and Innovation) and the private limited company “Valstybinis investicijų valdymo agentūra“ (managed by the Ministry of Finance). State funds will be invested in the capital of these companies, EUR 100 mln. and EUR 1 million respectively. Initial investments from the state are already planned, and the aim will be to attract funds from private investors as soon as possible.


The fund would only invest in companies that have experienced financial difficulties due to COVID-19 and do not have access to borrowing or financing from the market. The fund will also seek to help medium-sized and large Lithuanian companies, the closure of which would cause a chain reaction and affect the entities involved, as well as have significant social and economic consequences.

UPDATED: 2020, May 13

Taking into account the criteria set by the Government of the Republic of Lithuania, the State Tax Inspectorate (STI) amounted a list of 34 000 micro-enterprises that will be personally invited to apply for a subsidy.

Submit a request for subsidy can companies that:

  • at May 1 of this year had a minimum of 1 and a maximum of 9 employees;
  • are included in the lists of COVID-19 affected companies compiled by the STI;
  • in 2019 paid personal income tax to municipal and state budgets;
  • are not bankrupt, are being restructured or are in liquidation.


The total amount of aid granted to one company (including other measures) must not exceed 200 thousand over the last three tax years. For a company engaged in road freight transport, the amount shall not exceed 100 thousand euros; for one enterprise of the agricultural sector - 20 thousand euros; for one company in the fisheries and aquaculture sector - 30 thousand euros.


The subsidy is calculated according to the amount of personal income tax paid by the company in 2019:

  • if the income tax paid by the company in 2019 reaches up to 1 thousand a minimum grant is EUR 500;
  • if the income tax paid by the company in 2019 is from 1 thousand up to 2 thousand EUR the amount of the subsidy is EUR 1000;
  • if the income tax paid by the applicant in 2019 amounts to more than 2 thousand the amount of the grant is half of the applicant's paid income tax in 2019.

 

UPDATED: 2020, April 21

Municipal business support during the quarantine of the COVID-19 pandemic

Municipalities of major Lithuanian cities offer assistance to their residents who are experiencing financial difficulties due to quarantine announced by the COVID-19 epidemic.

 

VILNIUS City Municipality:

  • Supported the decision to reimburse the fees paid before the quarantine to the owners of outdoor cafes, non-food pavilions, flower and souvenir kiosks, as activities were restricted and prohibited. In addition, all owners of outdoor cafes are exempt from paying the local toll for 2020. Within one month of the application, the local toll will be refunded for as many days as entrepreneurs and traders were unable to use the permits issued.
  • During the quarantine period, Vilnius residents were exempted from paying real estate rents. This municipal assistance is available to tenants of real estate or land, as well as tenants of state-owned land engaged in cultural, leisure, catering and other activities. Even if during quarantine the tenants of municipal premises found a way to partially operate in other forms, as long as their main activity is not possible due to quarantine restrictions, they are also exempt from rent.
  • Provided financial assistance to residents - all those whose income during the quarantine dropped to 437.50 EUR per person (living alone) or when one family member has an amount of 375 Eur, will receive a benefit of up to 975 Eur during this period, depending on the size of the family. Vilnius City Municipality plans to provide one-time, targeted and in individual cases periodic financial support to all Vilnius residents who have suffered financially due to the announcement of quarantine.

KLAIPEDA City Municipality:

  • Exempts from local fees for outdoor advertising on objects belonging to Klaipeda city municipality.
    • Exempts from local fees for trade and provision of services in public places of the city during the quarantine period
  • Postpones payment of rent for municipal real estate. Payment of rent may be deferred to tenants whose activities are on the list of prohibited activities during the quarantine period or to tenants who suspend their activities in the leased premises and do not use the premises after the quarantine regime has been announced.• Postpones payment of rent for municipal real estate. Payment of rent may be deferred to tenants whose activities are on the list of prohibited activities during the quarantine period or to tenants who suspend their activities in the leased premises and do not use the premises after the quarantine regime has been announced.

UPDATED: 2020, April 8

Response COVID-19: aid to the agricultural sector

In order to mitigate the effects of the coronavirus outbreak, the Ministry of Agriculture has taken decisions which:

  • The Agricultural Loan Guarantee Fund will also allow guarantees to be provided for loans to pay wages; 
  • compensation of interest and leasing guarantee deposit increased to 100%; 
  • interest compensation will reach economic operators on a monthly basis rather than quarterly as it was before.

Until 1 December 2020, operators in rural areas investing in primary agricultural production who are leasing agricultural machinery and/or those investing in other activities in a rural area who are leasing production equipment and/or equipment, shall be compensated 100 % the guarantee premium paid to the company for the provision of the guarantee.

The new version of the loan rules provides that interest paid before 31 December 2020 on loans taken out after the entry into force of the rules and provided with the company's individual guarantee shall be reimbursed 100% (instead of the 80%) interest paid. The maximum annual interest rate on which the aid is calculated has been increased to 8 % (instead of 6 %). Interest compensation may also be granted for loans for the payment of wages and related taxes.

UPDATED: 2020, April 7

Combating COVID-19: Business support measures launched

Out of the EUR 5 billion of measures to promote business and economic recovery almost a quarter - EUR 1.3 billion - is at the disposal of the Ministry of Economy and Innovation, which has already started implementing the business support plan on Friday (April 3):

  • From 3 April, small and medium-sized enterprises may apply to INVEGA for interest compensation;
  • From 5 April, self-employed and employers who, due to an emergency situation  and quarantine announcement, release workers into downtime can already apply for benefits and subsidies to the Employment Service;
  • A new measure will be put in place on 10 April to allow small and medium-sized enterprises to apply for loans to pay bills to suppliers with whom companies have been unable to account due to suspended activities;
  • From 14 April, small and medium-sized enterprises that have experienced difficulties with coronavirus will be able to apply for loans to maintain liquidity (use the money to cover part of their wages, rent and other necessary expenses). Funding will be provided within one day.
  • On 15 April, the COVID fund will become operational for medium-sized and large enterprises in temporary difficulties. The emerging fund will help to ensure the liquidity of medium and large enterprises, access to finance and enable businesses to recover more quickly from a crisis situation.
  • On 16 April it is planned to introduce portfolio guarantees on much more favorable terms. The government-approved plan for measures stimulate the economy and mitigate the effects of COVID-19 has more than doubled the fund for state guarantees.

UPDATED: 2020, April 7

Combating COVID-19: Business support measures launched

Out of the EUR 5 billion of measures to promote business and economic recovery almost a quarter - EUR 1.3 billion - is at the disposal of the Ministry of Economy and Innovation, which has already started implementing the business support plan on Friday (April 3):

  • From 3 April, small and medium-sized enterprises may apply to INVEGA for interest compensation;
  • From 5 April, self-employed and employers who, due to an emergency situation  and quarantine announcement, release workers into downtime can already apply for benefits and subsidies to the Employment Service;
  • A new measure will be put in place on 10 April to allow small and medium-sized enterprises to apply for loans to pay bills to suppliers with whom companies have been unable to account due to suspended activities;
  • From 14 April, small and medium-sized enterprises that have experienced difficulties with coronavirus will be able to apply for loans to maintain liquidity (use the money to cover part of their wages, rent and other necessary expenses). Funding will be provided within one day.
  • On 15 April, the COVID fund will become operational for medium-sized and large enterprises in temporary difficulties. The emerging fund will help to ensure the liquidity of medium and large enterprises, access to finance and enable businesses to recover more quickly from a crisis situation.
  • On 16 April it is planned to introduce portfolio guarantees on much more favorable terms. The government-approved plan for measures stimulate the economy and mitigate the effects of COVID-19 has more than doubled the fund for state guarantees.

UPDATED: 2020, April 2

Government decided to establish a foundation that would invest into businesses facing difficulties because of COVID-19

In order to minimize COVID-19 effect on the economy, Government reached a decision to establish Business Support Foundation – COVID-19. This foundation will help ensure liquidity and opportunity to get financing for medium and large enterprises thus helping business to recover after crisis. Foundation is supposed to be established no later than 15th of April.

Business Support Foundation will invest into equity securities and debt securities of enterprises facing financial challenges that create risk for their business continuity because of the epidemiological situation. Enterprises will also be able to get loans from this foundation. This measure will be last resort mean of acquiring funds when it is not possible anywhere else.

Newly established foundation will lend and invest directly, not through financial intermediaries. Various means of financial market will be used for lending: loans, bonds, convertible bonds, shares, raising funds from other investors.

Foundation will be financed from state funds. EUR 100 million will be allocated for this purpose at the beginning.

UPDATED: 2020, March 25

The administration of EU funds simplified in response to COVID-19

The Ministry of Finance reports that the European Union Funds Administration System, in response to the country's situation and for reasons of flexibility, implementing the Government's Economic Promotion and COVID-19 Consequences Mitigation Plan, is accelerating the pace of investment under the EU Investment Action Program 2014-2020.

The Minister of Finance has already approved the Temporary Procedure for Simplifying the Management of Investment Projects in the European Union. The interim order will remain in force until an emergency remains declared in the country.

The main changes include increasing the maximum advance to 50% (was 30%), which is particularly important for project promoters who lack working capital. Accelerating payments has made it possible to submit payment requests more frequently and to shorten payment deadlines tow times. The requirement to prepare or revise an investment project for the purchase of medical equipment or other measures necessary for the health sector shall also be waived. All changes are available at: www.esinvesticijos.lt.

The Ministry of Finance and implementing authorities in order to ensure the most flexible and smooth administration of projects carried out by EU funds call on project promoters for: faster payment to suppliers for goods delivered, services rendered and works performed. As long as the quarantine regime and similar restrictions are declared in the country, project activities and inspections may be carried out remotely. Those, that cannot be carried out remotely, must be delayed;

A common system e-mail is also created (ESfondaiCOVID-19@cpva.lt) which is dedicated for issues related to EU investment administration, project implementation (cost eligibility), planning of new instruments.

 

 

State Tax Inspectorate released list of taxpayers to whom the incentive measures – suspension of recovery actions of debts, exempt from interest or exempt from interest under tax loan agreements - will be applied automatically. Incentive measures regarding social security taxes will be applied for these taxpayers also.

It can be checked here, whether the taxpayer is included into the list (information in Lithuanian). In the search, provide name or code of the legal person. You can also search by the groups choosing indication “Tax payers, to whom the incentive tax measures related to COVID-19 are applied”

After the end of quarantine these taxpayers will have two months to pay their taxes or to conclude tax loan agreement without interest.

UPDATED: 2020, March 24

The Minister of Finance Vilius Šapoka today presented an aid package worth 2 billion euros for entrepreneurs affected by COVID-19, who already may apply for additional funding.

The package covers everyone: businesses that have stopped completely, businesses that are experiencing difficulties, businesses that see new opportunities, businesses that intend to invest. However, funding is primarily allocated to businesses that follow the principles of social responsibility, seek to maintain work places, do not send employees for unpaid leave and treat their business partners responsibly.

According to the Minister of Finance, the package includes grants, guarantees and other financial instruments.

Entrepreneurs facing difficulties due to COVID 19 and currently lacking working capital, should review their loan repayment or ensure further activity, as well as contact financial institutions (banks, leasing or factoring companies, credit unions, crowdfunding platforms, etc.), which will provide all the necessary information.

Initiatives adopted by the Ministry of Finance:

  • shortening the evaluation terms of issuing guarantees, developing new measures and their implementation schemes;
  • expanding the concept of revolving loans (loans/guarantees will be granted not only for business development but also for liquidity);
  • including additional funding activities (e.g. development of RE);
  • no regional restrictions remain;measures will be accessible to large companies as well;
  • expanding the range of service providers (alternative funders may join);
  • a limit of guarantees is increased more than 4 times;
  • the interest will be reimbursed for 6 months (for loans – from the date of the beginning of quarantine), when banks grant a loan repayment leave.

At present, all existing measures for business offered by UAB “Investicijų ir verslo garantijos” (INVEGA), Lietuvos verslo paramos agentūra (LVPA), Europos socialinio fondo agentūra (ESFA), Žemės ūkio paskolų garantijų fondas and other agencies are valid and suitable for use.

 

€164m EU funding is available for Coronavirus solutions: call is valid until 18th March only

The European Commission is calling for startups and SMEs with technologies and innovations that could help in treating, testing, monitoring or other aspects of the Coronavirus outbreak to apply urgently to the next round of funding from the European Innovation Council. The deadline for applications to the EIC Accelerator is 17:00 on Wednesday 18 March (Brussels local time). With a budget of €164m, this call is “bottom up”, meaning there are no predefined thematic priorities and applicants with Coronavirus relevant innovations will be evaluated in the same way as other applicants. Nevertheless, the Commission will look to fast track the awarding of EIC grants and blended finance (combining grant and equity investment) to Coronavirus relevant innovations, as well as to facilitate access to other funding and investment sources.

Contact your local Deloitte team if you want our assistance in relation to preparation of your respective application.

Objective – To help save jobs and incomes

Measures:

1.    The State shall contribute for up to three months to the employers' efforts to preserve jobs by covering partial downtime or downtime payouts to workers. The workers must be guaranteed at least a minimum monthly salary. The share of public funds will be up to 60% but no more than minimum wage. The planned amount is EUR 250 million. It will be allocated from the Guarantee Fund and EU funds.

2.    Ensure the availability of sickness benefits for carers and persons with disabilities when establishing a quarantine regime in educational establishments or social care and employment centers. The planned amount is EUR 200 million. The funds will be allocated from the State Social Insurance fund and loans.

3.    To pay up to three months for the self-employed workers who have paid social security contributions a fixed payment of EUR 257 per month. Available to those, who cannot carry out their activities because of the quarantine regime. The planned amount is EUR 50 million. The funds will be allocated from the State Social Insurance fund and loans. Extend the period of suspension of the payment of mortgage deposits (other than interest) from 3 to 6 months, with the provision of a State guarantee.

Objective – To help businesses to ensure liquidity

Measures:

1.    To grant tax credits by defering or distributing the fees on an agreed schedule without interest;

2.    Suspend recovery actions for tax debts on the basis of reasonability criteria;

3.    To exempt taxpayers from fines;

4.    Make it possible to postpone or distribute the payment of the personal income tax on an agreed schedule;

5.    Increase the guarantee coverage of the Agriculture Loan Guarantee Fund and INVEGA fund by 500 million euro and extend the conditions for granting guarantees;

6.    Compensate SMEs for the amount of interest already paid from 50% to 100%;

7.    Recommend to municipalities to relieve commercial taxpayers of real estate and land taxes.

Objective – Boosting the economy

Measures:

1.    Accelerate investment programs (EUR 1.2 billion) by accelerating payments and increasing the funding intensity (EU funds and the State Investment Program);

2.    Reallocating EU investment funds in the fields of health, employment and business (EU funds). This measure is estimated to be EUR 250 million.

3.    Accelerate the use of
State budget appropriations for current expenditure (state budget);

4.    Allow the use of all funds from the climate change programme and the road maintenance and development programme and accelerate the renovation programme of multi-storey houses (public budgets, EU funds, other public funds). This measure is estimated to be EUR 250 million.

5.    Setting up a COVID-19 mitigation fund and making it possible for legal and natural persons to donate funds;

6.    To introduce additional limits on state guarantees in order to create or supplement financial instruments, with the state assuming the primary risk. This measure is estimated to be EUR 500 million.

7.    Recommend Bank of Lithuania to take regulatory measures for credit institutions in order to achieve the bank's lending potential of EUR 2 billion: 

a.   Reduction of capital adequacy requirements for credit
institutions;

b.   Reduction of liquidity buffers;

c.   Reduction of other supervision measures.

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