COVID-19 – Principal government measures adopted

Country: Spain
Date: March 18^th 2020

As to the general situation

The Spanish Government declared a State of Emergency last Saturday March 15^th. Due to legal regulations the State of Emergency lasts for 15 days but an extension is probable (although it will need the consent of Parliament).

The most important consequences of the State of Emergency relate to the following:

1. All persons shall be confined in their homes
2. Only the following exceptions are allowed:

• Go and return to work. It is recommended to implement home-working where possible
• Essential Shopping (food, pharmaceuticals, cleaning, gas stations, banks, etc.).
• Caring for minors, elderly and disabled.

3. All shops that don’t cater to essential needs must be closed
4. All leisure businesses must close (cinemas, theatres, sport venues, gyms, etc.)
5. Schools are closed.
6. Restaurants and bars must close (except for home delivery and take-away).
7. No public masses.
8. Public places are closed: Parks, beaches, etc.
9. Public transport still continues operating but in long and medium distances there are important restrictions.

Therefore, the objective of the emergency state is to confine as many persons as possible at home at least for the next weeks.

The government is also going to introduce regulations concerning the delayed payment of taxes, payroll taxes, suspension of deadlines, public credit lines, protection of vulnerable people, etc. to try to lessen the impact of the emergency state.

As to Financial Support

The Government has issued Royal Decree 465/2020 to complement the Declaration of Emergency that was discussed in our previous notice and that was published in today’s official Gazette with immediate effects.

The aim of the Decree was to try to lessen the impact on companies affected by the Emergency Declaration and the closures of businesses mandated by said Declaration.

Most of the measures impacted individual situations, but there were also included some measures to help companies.

As for financial support, the most important measure was to institute a program of public credit guarantees for an amount of 100.000 million euros.

The problem with the program is that it is not yet fully operative nor are the details clear on how it is going to work. In principle, according to the published decree, the guarantees aim to facilitate that banks grant credit lines to companies in order to ensure liquidity in the market.

However, this means that the first lenders and therefore risk-takers will be the banks so that we have to wait for agreements to be reached between the authorities and the banks on how the state-guarantees are going to work. In the past these guarantees were not easy to execute for the banks and were paid with relevant delays so that banks also asked the companies for additional guarantees. This would of course negate the intended positive effects of helping struggling companies.

Additionally to the financial support, the Royal Decree contained also important measures concerning the temporary regulation and suspension of employment contracts, delays in the payment of taxes, suspension of administrative timelines, etc.

Social, Social Security, financial and fiscal measures

The Royal Decree-Law 7/2020 adopted social, Social Security, financial and fiscal measures to respond to the economic impact of COVID-19, in principle, temporarily.

In this sense, article 14 of the aforementioned Royal Decree-Law 7/2020 allows a deferral and fractioning of tax debts, in accordance with the provisions of articles 65 and 82.2, a) of the General Tax Law, provided that it is an individual or a small and medium-sized company, understanding for this : with a sales volume of less than 6,010,121.04 euros in 2019.

The postponement has new characteristics with respect to the general regime that also applies to taxes that are not generated for the company which pays them: VAT, withholdings and payments in advance and, in addition, these debts will not accrue interest during the first three months. The postponement is up to six months.

• The deadlines for payment of tax debts which were notified before the Royal decree-law entered into force are extended until April 30^th.
• The deadlines to meet the requirements, for different proceedings or requests of information from the Tax Authority, allegations, sanctions, repayments, amendments of material errors, are extended until April 30^th, if they were still open when the royal decree-law entered into force.
• The deadlines for payment of tax debts notified after the entry into force of the royal decree law are extended until May 20^th
• The deadlines to meet the requirements, for different proceedings or requests of information from the Tax Authority, allegations, sanctions, repayments, amendments of material errors, are extended until May 20^th, if they were notified after the royal decree-law entered into force.

The deadlines for submitting and, where appropriate, paying the next tax returns (VAT, withholding taxes, intra-community return, intrastats, etc.) have not been modified.

Mercantile Area with effects on the accounting formulation

1. Possibility of holding meetings of the Board of Directors by videoconference.
2. Suspension of the deadlines for the formulation, approval and deposit of annual accounts, to be resumed for three months after the end of the state of alert.
3. Suspension of the period of expiry of entries in the Mercantile Register.
4. Suspension of the statutory deadlines arising from a legal cause for dissolution of the company. The directors will not be liable for the company’s debts incurred during this period.
5. Suspension of the right of separation of the company partners.
6. Establishment of a “bankruptcy moratorium”, to avoid a possible avalanche of insolvency cases.