The Government of Spain has made through the Royal Decree Law 5/2021 an amount of aid to entrepreneurs and self-employed who have experienced losses in their 2020 financial years due to the Covid 19 pandemic.
This decree aims to prevent that the fall of the companies in Spain continues to happen abruptly, for this, it seeks to protect the productive fabric so that the economy stabilizes and thus, in turn, protect employment.
This decree was published in March, where it specifies that such companies will begin to receive certain aid from the autonomous communities, as long as the requirements to be able to apply to them are met.
It should be noted that the deadline to be able to apply for this aid will be from today June 21, 2021, until June 30 (2021). The application will be made by submitting a form that must be filled in with the requested data.
Destination of financial aid
This aid will be used to pay debts with suppliers or banks. In this case, with this aid you will not be able to pay workers, nor will they apply to debts that are not due, that is to say, in the event that you want to pay debts of bank loans with this aid, such debts must be in arrears.
The payments of the aforementioned debts may be paid with this financial aid as long as they come from between March 1, 2020 and May 31, 2021, in addition to the fact that the debts must have a contract formalized prior to March 13, 2021, that is to say, for debt documents issued after this date, they may not be paid with this financial aid.
The priority of the payments must be destined mainly to suppliers, in order of seniority, and after making such payments, the bank debts may be reduced under the aforementioned conditions.
Eligibility for financial assistance
The first requirement requested in RDL 5/2021 consists of 3 situations, where you must be experiencing at least one of them:
- Have a decrease of at least 30% in the economic activity carried out compared to 2019. For example, if the economic activity of your company produced in 2019 an amount of 1,000,000 Euros, then for 2020 you must have experienced a production of maximum 700,000 Euros.
- Apply to the objective estimation regime in the Personal Income Tax (IRPF).
- To be a consolidated group taxed in the Corporate Income Tax, where a decrease of the group of more than 30% in the economic activity is accredited.
The second requirement is that the economic activity you are implementing must be included in the National Classification of Economic Activities (CNAE), as indicated in Annex I of the Royal Decree-Law.
The last requirement is that you must continue to exercise the economic activity at the present time.
There are a number of guidelines that you must follow after the grants are awarded:
Dividends may not be paid in 2021 or 2022, nor may the salaries of the company’s directors or managers be increased.
The economic activity must be kept open until June 30, 2022.
The company’s tax residence must not be located in a territory classified as a tax haven.
Not to have closed the activity before the request of the aid.
Type of grants you may receive
You will be able to receive up to 40% of the drop you experienced, i.e. if in 2019 your activity was 1,000,000 Euros, and in 2020 it was 700,000 Euros, then you can receive up to 40% of the 300,000 Euros you experienced a drop. This case applies as long as you have less than 10 employees. (The aid will be a minimum of 4,000 euros and a maximum of 200,000 euros).
Up to 20% of the fall suffered, when there are more than 10 employees in the company. (The aid will be a minimum of 4,000 euros and a maximum of 200,000 euros).
You will also be able to receive up to 3,000 euros for employers who apply the objective estimation regime in the IRPF.
If my company is foreign, can I apply?
Yes, all the companies that develop their economic activity in the Spanish territory can apply, so, if your company is one of them and you have experienced losses since the beginning of the pandemic, this support to the business solvency will surely be of great help to cushion your debts. If you have any questions about the application to these aids, do not hesitate to contact us to offer you a quality advice with our experts in the field.