Act “On measures to prevent and control national threats and its consequences in the spread of COVID-19”
20 March 2020
In response to the consequences of COVID-19, the Latvian Parliament on 20 March 2020 has adopted the law “On measures to prevent and control national threats and its consequences in the spread of COVID-19”.
In response to the consequences of COVID-19, the Latvian Parliament on 20 March 2020 has adopted the law “On measures to prevent and control national threats and its consequences in the spread of COVID-19”. Here is a look at the most important support measures planned.
The Cabinet will identify the sectors most affected by COVID-19 – only companies in these sectors will be subject to the specific support measures set out in this law if not stated otherwise.
Tax incentives to support entrepreneurs
In the event of a delay in paying tax due to COVID-19, the company can file a reasoned application within 2 months with the tax authorities asking for tax deferral up to three years. The granting of the said tax deferral will not rise to interest for late payment.
For the period of 2020, individuals will be exempt from paying personal income tax on operating income. Also, local municipalities are free to set other real estate tax payment deadlines.
The SRS will ensure immediate reimbursement of the approved overpaid value added tax, which is carried forward to the next tax period by the end of the tax year, and will ensure a refund of the overpaid VAT amount approved by 31 December 2020, thus creating free funds for businesses to overcome the spread of COVID-19.
For producers of disinfectants, the purchase of alcohol free of excise tax
By new law alcohol is exempted from excise duty in order to provide disinfectants in the required amount. To control this process, disinfectant manufacturers will need to apply to the SRS for a special permit to purchase alcoholic beverages without excise duty. In addition, the new law allows for the sale of excise goods by distance contract.
Exemption from losses and contractual penalties
The law states that failure to perform the obligations arising from the contract or court judgment in due time from March 20, 2020 to December 31, 2020, will not create an obligation to pay default interest, a penalty or an obligation to pay damages for the delay. This exemption will only apply to companies in the affected sectors identified by the Cabinet of Ministers. If a sector company leases public property, state and municipal authorities shall exempt companies from rents during the crisis or make decision about reducing lease.
Downtime will be partly compensated by the state
The government will compensate companies for downtime if the employer is unable to provide employees with a salary. The compensation will be reimbursed at amount of 75% of the employee's salary, subject to a ceiling of EUR 700 per month. Downtime allowance will not be subject to personal income tax and compulsory social security contributions.
On March 19, the government decided that not only employees of companies affected by the COVID-19 crisis would be eligible for downtime benefits, but that companies who meet certain criteria would be eligible, too. The criteria will be developed by the responsible ministries, which will work intensively over the coming weeks on various support solutions.
The government has indicated that educational establishments will also be among the businesses affected by the crisis.
Extended annual report deadlines
For entities subject to the Annual Accounts and Consolidated Annual Reports, the submission deadline will be extended by three months, while for associations, foundations, religious organizations, the deadline is extended to July 31, 2020.
Extension of time limits: enforcement of judgments, debt recovery, insolvency
The 10-day period for voluntary execution of the judgement provided for in the second paragraph of Article 204.1. of the Civil Procedure Law is extended to 60 days.
In addition, it is provided that an uncontested enforcement of an obligation can only be made if proof of service of the warning has been issued to the debtor no earlier than 60 days before the submission of the application. The 21-day time limit for the debtor to object to the extrajudicial debt recovery law is extended to 60 days.
In view of the fall in revenue generated by the emergency and the decline in economic activity, it is stipulated that, until 1 September 2020, creditors may not apply for legal person insolvency proceedings if any of the following features of the insolvency proceedings of a legal person exists according to Article 57 (1) of Insolvency law:
- when applying compulsory execution means it has not been possible to execute the court adjudication regarding the recovery of debt from the debtor;
- the debtor - a limited liability company or a joint stock company - has not honoured one or more debt obligations from which the principal debt amount separately or in total exceeds 4268 euros and which are past due, and the creditor or creditors have issued or sent a warning at the sender's own expense to the legal address of the debtor regarding the intention to submit an application for the insolvency proceedings of a legal person, and the debtor has not settled the debt or raised justified objections to the claim within three weeks after handing over of the warning to the postal merchant;
- the debtor - another subject referred to in Section 56 of this Law - has not honoured one or more debt obligations from which the principal debt amount separately or in total exceeds 2134 euros and which are past due, and the creditor or creditors have issued or sent a warning at the sender's own expense to the legal address of the debtor regarding the intention to submit an application for the insolvency proceedings of a legal person, and the debtor has not settled the debt or raised justified objections to the claim within three weeks after handing over of the warning to the postal merchant;
- the debtor has not paid an employee the work remuneration in full, compensation for damages in connection with an accident at work or an occupational disease or has not made the mandatory social insurance payments within two months after the day specified for payment. Unless the day of payment of work remuneration is specified in the employment contract, this day shall be considered to be the first working day of the following month
Support from crisis guarantee funds
In order to provide the COVID-19 crisis-affected business support tools, additional funding will be provided to finance the Crisis Guarantee Program and the Crisis Loan Program, thereby mitigating the negative impact of Covid-19 on businesses.
In the nearest future, the Cabinet of Ministers will be able to adopt additional support measures for companies affected by COVID-19, such as deferral of principal payments, deferment of accrued interest payments, extension of principal repayment or other changes to the repayment schedule.
A state development finance institution ALTUM during outbreak of Covid-19 will provide credit guarantees and loans to companies affected by the crisis. In the tourism sector, loan interest rates will be reduced by 50% (for small and medium-sized enterprises) or by 15% (for large enterprises in the tourism and related sectors). ALTUM “credit vacation” guarantees will be available to companies in all sectors (except for restrictions in state aid regulations – gambling, financial brokerage, arms trading, etc.).