Slovak government approves state-aid measures

On March 18, the Slovak government approved a package of state-aid measures proposed by Slovak Economy Minister Peter Ziga to support the business sector with the fallout from the on-going coronavirus epidemic. In a video-conference call with industrial union representatives, Ziga stated that “the economy must not collapse," and that, "people must not lose their jobs”.

The aim of this economic package is to help Slovak companies and sole traders "buy time" with measures on relaxing legal deadlines and others that will reduce pressure on company cash flow. These measures are expected to allow for flexibility, temporarily reduce regulation and offer support mechanisms.

Measures that can be implemented without delay

These measures carry implications for banks and financial institutions. Although negotiations with the banking and financial sector are on-going, it is proposed that financial institutions suspend loan, mortgage and leasing repayments without individuals entering the debtor’s registry, and that interest and principal payments for both natural persons (i.e. employees) and legal entities be postponed. A specific banking product is also being suggested to help enterprises overcome the negative financial situation resulting from the coronavirus measures. As compensation, banks may not have to pay the bank levy. In 2020, banks are expected to pay between EUR 280 million and EUR 290 million through the bank levy, which will be approximately EUR 144 million more than the payment last year.

Similarly, it has been proposed to exclude insurance companies from the special insurance levy and to either cancel or postpone the insurance tax since insurance companies are likely to bear the greatest burden in providing compensation for damages caused by this epidemic.

It is also suggested that the Slovak Guarantee and Development Bank and EXIMBANKA provide short-term and interest-free loans to businesses, especially to SMEs.

Another significant measure proposed is exempting the wages paid to employees in the event of obstacles on the side of employers (due to quarantine measures or reduced orders) from social, health and income tax.

Additionally, for a specified period, the state could finance some or all electricity tariffs, which would reduce the price of electricity for businesses and households.

Moreover, fines should not be imposed on companies if they cannot fulfil public contracts on schedule; and fines from regulators and authorities should be forgiven.

Other suggested measures include: a three-month postponement for the filing of all income tax returns and all tax payments for 2019; a three-month postponement of health and social insurance payments and levies for self-employed individuals and entrepreneurs, and then paying this money gradually over the next 18 months, prolongation of payment of custom debts and automatic prolongation of validity of technical and emission controls for vehicles until 12 June 2020.

Companies should also reduce any new and planned mandatory revision activities, e.g. of plant machinery and equipment, at least until June 2020 except for controls related to the coronavirus, and no fines will be imposed.

Measures requiring legislative changes

The legislative changes relate to social benefits for employees. For example, in instances where employees must stay home to take care of their children, one parent will receive 80% of their salary (paid by the Social Insurance Company) from the first day to avoid parents having to leave children with grandparents and the risk of infection this would cause.

Measures focusing on prevention and a system of steps for enterprises

Actions have been proposed that focus specifically on strategic and essential businesses, such as electricity, energy, chemical and healthcare enterprises to avoid their collapse by ensuring they have sufficient resources and the necessary workforce (e.g. through speedy preferential testing) for operations.

Measures for new economic growth

Inspired by other countries, the package proposes reducing tax losses in a manner that would either be for an unlimited time (as in Austria) or limited to a particular time period (e.g. for seven years as in the Czech Republic). The package also encourages investment support in the private sector through mechanisms such as accelerated depreciation.

The cost of this economic package is as yet unclear, and all state-aid measures need parliamentary approval.

In addition to the package, there are proposals to use EU funds to cover the effects of the crisis and to support the economy. These funds could be made available to large companies and sectors exempt from Eurofunds.

For more information on Slovak government measures to support business, contact your regular CMS advisor or local CMS experts: Petra Corba Stark and Zuzana Nikodemova.