COVID-19 Fixed Cost Subsidy enters its second phase

The fixed cost subsidy, a key measure to support companies in dealing with the Corona crisis, is now entering its second phase. As reported several times, the fixed cost subsidy is intended to contribute to maintaining solvency and bridging liquidity difficulties (however, it must not be used to pay bonuses to directors or managing directors). Companies with a registered office or place of business in Austria that carry out operational activities (income from agriculture and forestry, self-employment, or business operations) may in principle apply for the fixed cost subsidy (II). In addition, they must have implemented damage reduction measures to minimize the fixed costs to be covered by the subsidy. The fixed cost subsidy is not subject to taxation and is also non-refundable - however, it reduces the deductible expenses in the relevant fiscal year, insofar as they are covered by the fixed cost subsidy.

The Fixed Cost Allowance II is also characterized by improved framework conditions. In addition to the doubling of the duration of the period for which the allowance can be applied for, the requirements for claiming the allowance have also been lowered and the scope of the allowance has been increased. Understandably, incurred fixed costs must in no way be counted twice under the Fixed Cost Allowance I and II. The subsidized fixed costs are diverse and include:

• Office space rentals and leases,
• AFA for purchases made before March 16, 2020, as well as fictitious depreciation for movable business assets,
• employer-based insurance premiums,
• Interest expenses,
• Leasing rates (compared to Phase I, leasing rates are now fully eligible for subsidies) – provided that the (fictitious) AfA is applied to the leased business asset, this only applies to the financing cost portion of the leasing rates,
• operating license fees,
• Telecommunications, electricity, gas, energy and heating costs,
• Loss of value of at least 50% (due to the COVID-19 crisis) for perishable/seasonal goods,
• Personnel costs (exclusively for the processing of crisis-related cancellations and rebookings), reasonable employer’s remuneration (maximum of €2,666.67 including social security contributions minus fringe benefits), management remuneration in case of capital companies (unless insured under the ASVG),
• Application costs (for tax advisors, auditors, and financial accountants) in accordance with the Fixed Cost Allowance II of €500, provided that a grant of less than €12,000 is applied for;,
• Expenditures for preparing to generate sales (so-called frustrated expenses; a grant for this can also be applied for retroactively for Phase I),
• other operational payment obligations (which do not affect the staff).

In calculating the fixed cost allowance, a significant change has occurred; the allowance is now calculated linearly (i.e., for a 85% sales decline, for example, 85% of the fixed costs are reimbursed). Previously, the allowance was provided in stages. The allowance is already granted from 30% sales decline (instead of 40%), and can amount to up to 100%. Enterprises with less than €100,000 in sales in the most recently filed tax return can set aside a flat-rate of 30% of the sales decline as fixed costs. The lower limit of the fixed cost allowance is €500, and the upper limit is €5 million per company.

In calculating the grant amount, the decrease in sales plays a significant role. Here, a distinction can be made between the quarterly and monthly approaches. In the quarterly approach, the comparison is made between Q3 and Q4/2020 with the corresponding quarters of the previous year; or Q4/2020 and Q1/2021 are compared with the corresponding quarters of the previous year. If the monthly approach is chosen, six of the nine monthly time periods must be selected between June 16, 2020 and March 15, 2021. If the fixed cost subsidy has already been applied for in Phase I, the selected time periods for Phase II must follow the phase I period.

The application for the Fixed Cost Allowance II is made via FinanzOnline to COFAG, as for Phase I. The amount of sales losses and fixed costs must be confirmed by a tax advisor, auditor, or financial accountant. The payment is finally made in two installments. Since the "green light" from the European Commission has not yet been given, there have been delays in the start of the application for the Fixed Cost Allowance II - the application for the first tranche can be submitted until December 15, 2020 at the latest. The application period for the 2nd tranche extends from December 16, 2020 to August 31, 2021.

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