Following the announcement of economic measures aimed towards responding to the COVID-19 outbreak, the Serbian Government issued two regulations on 10 April 2020 that determine the conditions and criteria for compliance of the state aid (i) for remedying the negative effects caused by COVID-19 and (ii) for remedying a serious disturbance in the economy caused by COVID-19, whereas both regulations will be valid until 1 July 2021. The two regulations provide clear-cut rules on the types of state aid allowed, instruments for such aid, and the thresholds that need to be met in order for the aid to be compatible with the State Aid Law.
Regulation for remedying the negative effects caused by COVID-19
The Regulation for remedying the negative effects caused by COVID-19 provides rules on the state aid to be granted as compensation of damages directly caused by the COVID-19 pandemic. State aid granted in accordance with the criteria provided in this Regulation will represent a compatible state aid within the meaning of the State Aid Law.
The aid can be provided under the following conditions:
- the total amount of aid is not higher than the expenses incurred by the beneficiary due to the COVID-19 outbreak;
- the state aid is provided as a scheme with an estimated duration, budget, instrument, intensity and beneficiaries;
- the actual loss did not occur due to the non-compliance with the rules during the COVID-19 epidemic, i.e. if such expenses would be incurred regardless of the COVID-19 outbreak; and
- the beneficiary is not directly liable or it did not willfully, i.e. with gross negligence contribute to the incurrence of damage.
The aid can be granted up to 100% of incurred standardized expenses, if the beneficiary provides grantor with a report from an independent evaluator on the amount of these costs, informs on its existing insurance policies, as well as any previous aid received for these purposes, and states that it will return any excessive amount of state aid received. These expenses shall be reduced for the amount of advance payment made by the grantor, business insurance or other fees (obtained in arbitration, court proceedings, etc. concerning the COVID-19 epidemic).
Regulation for remedying a serious disturbance in the economy caused by COVID-19
The Regulation for remedying a serious disturbance in the economy caused by COVID-19 provides rules of state aid granted to undertakings in order to remedy the liquidity shortages caused by the COVID-19 outbreak. The state aid under this regulation can be granted only to undertakings that were not in difficulty on 31 December 2019.
The aid instruments that concern (a) direct grants for employee salaries and (b) postponement of tax and social contributions – do not amount to state aid during the application of this Regulation if they are provided via a scheme encompassing all the undertakings.
On the other hand, certain instruments are considered permissible state aid up to certain thresholds. We have in particular elaborated the state aid instruments that could be mostly used during the current situation – direct subsidies or debt cancelation, direct subsidies for salaries, as well as the postponement of tax and social contributions (besides those instruments, the Regulation also applies to subsidized interest rates, guarantees on loans, and short-term export credit insurances).
Direct subsidies, debt cancellation, favorable payment terms, tax, and other reliefs can be granted as a scheme if the nominal amount of aid does not exceed gross amount of EUR 800,000 per single undertaking, and the scheme contains a total estimated amount of the aid that will be provided. The aid may be granted before 31 December 2020, except for tax reliefs which can be granted until the expiry of the deadline for submission of the tax return for 2020 (end of June 2021).
Direct subsidies for salaries in order to avoid layoffs that are provided via a scheme encompassing all undertakings – do not amount to state aid. In case the scheme does not encompass all undertakings, such aid will be deemed permissible state aid if (i) the aim of the aid is to preserve jobs; (ii) the aid is targeted towards certain regions, sectors or undertakings which are in particular affected by COVID-19; (iii) the direct grant encompasses salaries (up to 12 months) for employees who would be laid off due to the termination or reduction of business activities due to COVID-19; and (iv) monthly direct grant does not exceed 80% gross salary of employees for which the grant is provided.
Postponement of tax and social contribution obligations – the instrument does not amount to state aid if it encompasses all the undertakings. If it, however, does not encompass all the undertakings, it will be deemed a permissible state aid if it is a scheme targeted towards certain regions, economy sectors or undertakings which are in particular affected by COVID-19, whereby it is granted before 31 December 2020. The last date of the postponement can be 31 December 2022.