11/04/20

Coronavirus crisis: Belgium adopts measures to support the economy

The European Commission has adopted a Temporary Framework for State aid to support the economy in the context of the COVID-19 outbreak. Member States may grant direct subsidies or tax benefits, subsidised guarantees on bank loans, subsidised interest rates and short-term export credit insurance. On this basis, the federal government and the Regions have adopted various support measures in favour of undertakings.

As Member States have adopted increasingly strict containment measures, the first dramatic effects on the economy are beginning to be felt in the sectors of air transport, tourism, mass events, etc. The pandemic crisis will have a significant effect on the economy and thousands of businesses in Belgium will need public support to get through this difficult ordeal or even to avoid bankruptcy.

1. The framework put in place by the European Commission: which measures may be put in place by the Member States?

Aware of the impact of the crisis on the economy, the European Commission reacted very quickly by adopting on 19 March 2020 a Temporary Framework for State aid measures to support the economy in the current context of the COVID-19 surge. This framework sets out the European rules Member States have to respect when granting subsidies, tax benefits, public guarantees and interest rate subsidies in the context of the COVID-19 crisis.

The English text of the framework is available on the following link.

The Temporary Framework is based on Article 107(3)(b) of the TFEU, which concerns aid to remedy a serious disturbance in the EU economy. Only companies that encounter difficulties after 31 December 2019 are eligible for aid under the Temporary Framework, to ensure that it is not used for public support unrelated to the COVID-19 epidemic.

Member States are authorised until 31 December 2020 to :

1- Set up schemes for direct grants, recoverable advances or tax benefits of up to 800.000 euros to enable companies to meet an urgent need for cash;

2- Grant public guarantees on new bank loans, in the form of premiums, based on a table drawn up by the Commission according to the size of the beneficiary (SME or large enterprise) and the duration of the loan:

Guarantees with a maximum duration of 6 years can cover up to 90% (if the State bears the same risk as the financial institution) or 35% (if the risk is initially borne by the State) of the bank loan. The amount of which is determined on the basis of the operating needs of the enterprises (established on the basis of the wage bill or liquidity needs, or up to 25% of the beneficiary's total turnover in 2019). Guarantees may be given for investment and working capital loans;

3- Grant aid in the form of subsidised public loans to undertakings:

The interest rate on these loans must be at least equal to the rates laid down in the table established by the Commission according to the size of the beneficiary. The maximum amount of the loan is determined on the basis of the operating needs of the firms (established on the basis of the wage bill or cash requirements, or up to 25% of the beneficiary's total turnover in 2019). Loans of up to 6 years can cover both investment and working capital needs;

4- Loosen up the rules on short-term export credit insurance.

In the case of aid in the form of state guarantees and reduced interest rates, certain guarantees should be put in place to avoid possible indirect aid to credit or other financial institutions.

Indeed, credit and other financial institutions should, as far as possible, pass on the benefits of the aid to the final beneficiaries.

On 3 April 2020, the European Commission revised certain conditions applicable to the guarantees and subsidised loans and provided for new categories of aid to allow Member States to support for coronavirus related research and development, for the construction and upscaling of testing facilities and for the production of products relevant to tackling the outbreak.

Furthermore, it will authorise under certain conditions targeted support in the form of deferral of tax payments and/or suspensions of social security contributions and targeted support in the form of wage subsidies for employees (limited to certain sectors, regions or types of companies).

All aid schemes under the Temporary Framework must be notified by Member States to the European Commission before their implementation and will be authorised until 31 December 2020.

These national measures must be notified in advance to the Commission. Several countries such as Germany, France, Luxembourg and Portugal have already received the green light from the Commission for their national aid schemes. In total, 25 decisions have been adopted since 12 March 2020.

The Commission encourages Member States to notify frameworks for national aid schemes, in particular where Member States delegate extensive economic powers to their regions. In Belgium, for example, the Federal Government will notify a framework scheme covering regional measures to avoid multiple notifications to the European Commission. This global notification is expected to take place soon.

In addition, Member States may introduce general measures such as wage subsidies and the suspension of tax payments for all companies. These do not constitute State aid and do not need to be notified to the European Commission unless they target certain sectors, regions or types of companies.

Finally, Member States may compensate companies for damage suffered as a result of the COVID-19 epidemic. The European Commission suggests that Member States apply this solution to compensate airlines under Article 107(2)(b) TFEU for damage suffered as a result of the COVID-19 epidemic. It published on 18 March 2020 the list of information to be provided by Member States for the notification of such aid - pleaserefer yo to our article of 19 March 2020.

2. Belgium's reaction: what public support is available to Belgian undertakings ?

Both the Federal Government and the Regions have adopted various measures to support the Belgian economy, within the framework of their respective competences.

Firstly, the Federal Government has adopted various measures allowing for the introduction of a payment plan (deferral, deferral and exemptions from payment in certain cases) in particular for social security contributions, VAT, withholding tax on earned income and personal and corporate taxes; provided that it can be demonstrated that the payment difficulties are linked to the COVID-19 epidemic. The State has also relaxed the conditions for resorting to temporary unemployment for force majeure or economic reasons. All applications must be submitted before 30 June 2020.

In various sectors such as the HORECA, events or trade, the State has taken special measures to provide financial support in the current crisis.

Further information on the federal measures can be found at the following link.

Then, each of the Regions adopted complementary measures within the framework of their economic and social competences.

For example, the Brussels-Capital Region decided to grant a premium of EUR 4 000 per company in certain sectors (catering, accommodation, recreational and sports activities, etc.) for which closure has become compulsory following the decisions of the National Security Council. It will grant public guarantees on bank loans totalling EUR 20 million. In addition, suppliers and catering establishments will be able to apply to the Region for reduced-interest loans.

More information on the Brussels support measures can be found at the following link.

The Walloon Region has set up a solidarity fund which will be used, among other things, to compensate companies that have closed completely or shut down to the tune of EUR 5 000, and to compensate companies that have had to adjust their days of business without closing totally during the week to the tune of EUR 2 500.

Other measures adopted in Wallonia are the freezing of outstanding loans, the granting of loans up to a maximum amount of EUR 200 000 by SOGEPA and Wallonie Santé, the granting of guarantees by GELIGAR in favour of large companies, etc.

More details on the measures adopted in the Walloon Region can be found at the following link.

Finally, the Flemish Region has also set up a system of bonuses for companies forced to close down as a result of the COVID-19 crisis. An amount of EUR 4 000 will be granted to any company that has had to close down completely and an amount of EUR 2 000 will be granted to those that have to close down at the weekend. If reopening is not possible after 21 days, a premium of EUR 160 per day will be granted to companies. In addition, the Region has set up a crisis guarantee scheme, with a budget of EUR 100 million, which will make it possible to guarantee up to 75% of loans amounting to EUR 100 000.

Further information on the measures taken in the Flemish Region can be found at the following link.

Finally, at a more local level, certain cities and municipalities have also adopted aid measures in favour of businesses, including a number of Flemish provinces.

These measures can be found at the following link.

Finally, individual measures are also possible for the sectors most affected, such as air transport. Such individual aid measures will have to be notified in advance to the European Commission. Many Member States are already in intense discussions with the Commission on support measures for their airlines. The first aid scheme in favour of French airlines was approved by the Commission on 31 March 2020 following the notification by the French State of a planned deferral of payment of the civil aviation tax and solidarity tax.

This will be followed by aid to airports, ground handling companies, hotels, the property sector, banks, the motor industry, etc.

Annabelle Lepièce, Partner, Brussels

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