In the context of the economic developments under the sanitary crisis, the Government has recently offered, by Emergency Ordinance no. 32/2020 and Emergency Ordinance no. 33/2020 (both published in the Official Gazette no. 260 of March 30th 2020), important clarifications regarding the support measures provided by G.E.O. no. 29/2020 and G.E.O. no. 30/2020.
After a brief period of absolutely necessary reflection for the correlation of the normative acts, the Costaș, Negru & Asociaţii team provides a global evaluation of these support measures, in the light of the most recent legislative changes.
Clarification of the Conditions under which the General Support Measures are Granted
In the original form of G.E.O. no. 30/2020, the general support measures were granted for two categories of people:
– the employees of the economic agents presumed to be affected by the interdictions implemented in the context of the state of emergency [art. XI paragraph (2) letter a) from G.E.O. no. 30/2020]
– the employees of the economic agents who could prove that they were affected, even partially, either by the interdictions implemented in the context of the state of emergency, or by the economic crisis following the health crisis [art. XI paragraph (2) letter b) from G.E.O. no. 30/2020].
Probably in the context of the reactions in the last 10 days regarding the difficult applicability of art. XI of G.E.O. no. 30/2020, there was a legislative intervention through G.E.O. no. 32/2020 and art. XI paragraph (2) was simplified. Thus, at the present time, according to the explicit intention of the legislator, all employees of the employers who temporarily reduce or interrupt their activity, as a whole or partially, as a result of the SARS-CoV-2 coronavirus epidemic, during the emergency period, will benefit from support measures. There are two observations required:
– On one hand, support measures will only be granted during the emergency period, even if the temporary reduction or interruption of the activity would take longer.
– On the other hand, the temporary reduction or interruption of the activity will be certified prima facie by the employer, by an affidavit.
Within the first commentary that the Costaș, Negru & Asociații team issued regarding the support measures envisioned in the initial form of G.E.O. no. 30/2020, we drew attention to the fact that a discriminatory regime was established, in the sense that all the employees of the employers mentioned in art. XI paragraph (2) letter a) could benefit from the support measures, while the employers from art. XI paragraph (2) letter b) had to choose only 75% of their employees in order to benefit from these support measures (although, potentially, all the employees of such an employer could be affected equally by the economic crisis). The legislator reacted and proceeded to the express repeal of art. XI paragraph (3) of the G.E.O. no. 30/2020, effective starting the 31st of March 2020. Therefore, at the present time, there is no restriction on the granting of support measures for people in technical unemployment.
The Situation of Employees with Several Employment Contracts
G.E.O. no. 32/2020 clarified the situation of employees with several employment contracts. Thus, according to art. XI paragraph (9) of G.E.O. no. 30/2020, introduced just now, the condition for granting the compensation of 75% of the basic salary is that all the individual employment contracts of the employee are suspended during the establishment of the state of emergency.
If all the individual employment contracts of the employee are suspended, the compensation for support is calculated by applying the 75% percentage on the highest salary (in relation to the most advantageous salary rights).
According to art. XI paragraph (11) of G.E.O. no. 30/2020, the compensation for support granted by the state can be supplemented by the employer, if the budget for personnel expenses allows it. As far as we are concerned, this scenario could be applicable if the maximum compensation (75% of the gross average salary of 5,429 lei, i.e. 4,072 lei) from the public budget is granted, but the gross contractual remuneration is higher (for example, the employee has a gross income established in the individual employment contract of 10,000 lei, so that the difference from 4,072 lei to 7,500 lei can be paid by the employer). The explanation of the legislative modification is to allow employers to contribute in part to the payment of their employees’ salaries, with a double purpose: on one hand, to ensure a higher level of income; on the other hand, to collect income tax and compulsory social contributions to the state budget for the amounts that the employer is able to pay. Although the penalty is not expressly provided within the legal norm, it appears to us that in the case of higher payments (for example, for a gross income of 10,000 lei, the state contributes 4,072 lei, and the employer would pay the difference up to 10,000 lei), the benefit offered by the state according to G.E.O. no. 30/2020 will be lost, as the employer would no longer be in the state of necessity presumed by the law.
Simplifying the Procedure for Requesting Support Measures
By the amendments brought by art. XII of G.E.O. no. 30/2020, the procedure for requesting support measures was simplified. Thus, all requests are sent by e-mail to the county agencies for employment, and from a physical perspective, the only documents that will be sent shall be the following:
– the application dated and signed by the legal representative of the employer;
– the employer’s affidavit;
– the list of the employees that are to benefit form the compensation of support.
As far as we are concerned, at least until the emergence of explicit contrary regulations, within the affidavit, the employers will have to refer to the scenarios described by the Order of the Minister of Economy, Energy and Business Environment: either they totally or partially interrupted the activity as a result of the decisions issued by the competent public authorities; or they have registered a decrease of the revenues with a minimum percentage of 25%. The interpretation of art. 3 of G.E.O. no. 33/2020 would lead to the same conclusion.
Effective Payment of the Compensation for Support
As we mentioned in our previous commentaries, the payment mechanism for the support compensation involves a circuit: the county agencies for employment pay the employers’ compensations and the employers transfer the amounts of their own employees, after calculating, withholding and transferring the compulsory social contributions and income tax. The novelty brought by the consecration of art. XIII paragraph (3) is that the employers are bound to pay to the employees the compensation within no more than 3 working days from the receipt by the employer of the amounts.
Special Support Measures for Freelancers and Athletes
The Government also amended art. XV of G.E.O. no. 30/2020 by G.E.O. no. 32/2020, explaining the special support measures that the freelancers and the athletes will benefit from. These measures are regulated under the conditions in which the restrictions established even before the declaration of the state of emergency paralysed the sports activity and affected, in whole or partially, the activity of some freelancers.
From analysing the current state of art. XV of G.E.O. no. 30/2020, the beneficiaries of this special support measures are:
a) the professionals, as they are defined by art. 3 paragraph (2) of the Civil Code;
b) the persons who have concluded individual labour agreements based on Law no. 1/2005 regarding the organisation and functioning of the co-op;
c) the persons referred to in art. 671 par. (1) letters a) – c) of the Law of Physical Education and Sport no. 69/2000 (respectively athletes, coaches, doctors, nurses, masseuses, physiotherapists, researchers);
d) natural persons who obtain income exclusively from copyright and related rights.
In accordance with article XV paragraph (1) of G.E.O. no. 30/2020, the first two categories of beneficiaries will receive a monthly compensation of 75% of the average gross wage for 2020, respectively the fixed amount of 4,072 lei. This compensation is granted during the state of emergency.
The third category of beneficiaries, coming from the sports movement, can claim and receive a 75% compensation of the money rights related to the performance of the sporting activity, but not more than 75% of the gross average salary of 5,429 lei, according to article XV paragraph (2) of G.E.O. no. 30/2020. It should be mentioned, however, that this compensation is granted for a longer period than the period of the state of emergency, i.e. during the temporary suspension of the sports activity contract at the initiative of the sports structure. Thus, if a club that can no longer take part in sports competitions temporarily suspended the contract of sports activity from the 9th of March 2020 and maintains this suspension until the 15th of May 2020 (the presumed date for the resuming of the sports activity), the compensation will be granted for the whole period, even if this period is longer than the state of emergency.
It should be specified that by art. XV paragraph (3) of the G.E.O. no. 30/2020, in its amended form, the sports structures may grant other compensations, without losing, in such a case, the benefit of the support measures granted by the state.
Finally, the fourth category of beneficiaries is that of natural persons who have an income from a single source: income from intellectual property rights. According to art. XV paragraph (4) of the G.E.O. no. 30/2020, introduced just now, during the state of emergency, these persons will receive a compensation of 75% of the average monthly gross salary (i.e. a fixed amount of 4,072 lei).
For all beneficiaries, the compensations described above are paid from the state budget.
The compensations described above remain taxable, in accordance with the general provisions of the Tax Code, as regards compulsory social contributions and the income tax.
The procedure for the payment of the compensation, pursuant to art. XV of G.E.O. no. 30/2020, was regulated by G.E.O. no. 32/2020. Thus, the payment will be made through the Paying and Social Inspection Agencies organised at county level (art. II of G.E.O. no. 32/2020).
In order to receive payment, the potential beneficiaries provided for in art. XV paragraph (1) and (4) of G.E.O. no. 30/2020 will send, by e-mail, a request accompanied by the copy of the identity document and an affidavit.
In contrast, for the persons mentioned in art. XV paragraph (2) of G.E.O. no. 30/2020, the sports structures will send the payment requests, the affidavits and the lists with the participants in the sports activity of which the activity was suspended.
Tax Measures Regulated by G.E.O. no. 33/2020
By G.E.O. no. 33/2020, the Government also regulated some tax measures designed to allow, on one hand, the supply of sanitary products that are an absolute necessity in the context of the sanitary crisis, and on the other hand to stimulate a responsible tax behaviour and the collection of minimal resources to the public budget.
Thus, in accordance with the provisions of art. 2 of G.E.O. no. 33/2020, the Government postponed the customs payment of VAT for the import of some medical products and devices. The following are relevant in context:
– This is not an exemption from paying VAT, but only a postponing of the payment of the VAT.
– The measure is essentially temporary, meaning that the VAT is no longer actually paid in customs during the state of emergency and another 30 days from the date of the termination of the state of emergency.
– The government chose to implement, in order to collect the VAT, according to art. 2 paragraph (3) of the G.E.O. no. 33/2020, the mechanism of reverse taxation. Thus, in the VAT returns, the tax will be highlighted both as a collected tax and as a deductible tax, within the limits and under the conditions of articles 297–301 of the Tax Code.
– The products for which this exceptional regime applies are expressly and limitatively provided for in the Annex to G.E.O. no. 33/2020 (The List of Goods for which the VAT is not Actually Paid to the Customs Authorities). These include, for example, test kits for COVID-19, masks, gloves and goggles, protective clothing made from plastic foil, disinfectants, oxygenated water, CT scanner, medical fans, medical supplies, medicines such as Paracetamol, Hydroxychloroquine, Lopinavir, Ritonavir, Remdesivir, Tocilizumab.
In order to collect on time a large part of the corporate income tax, art. 1 of G.E.O. no. 33/2020 instituted a system of tax discounts for those who pay the corporate income tax / income tax for micro-enterprises / the specific tax for certain activities related to the first trimester of 2020 until the deadline on the 25th of April 2020:
– large taxpayers benefit from a 5% discount on the payment of corporate income tax;
– small and medium-sized taxpayers benefit from a 10% discount on the payment of corporate income tax;
– taxpayers who owe the specific tax for certain activities according to Law no. 170/2016 benefit from the same discounts of 5% or 10%, depending on their type;
– the payers of the income of micro-enterprises benefit from a 10% discount.
In all the situations described above, according to art. 1 paragraph (5) of G.E.O. no. 33/2020, the tax is determined by subtracting from the tax that is due the discount calculated according to the rules shown above.
Additional Clarifications Regarding the Effects of Issuing the Certificate for the State of Emergency
Art. 3 of G.E.O. no. 33/2020 also clarified the effects of the Certificate for the State of Emergency (certificates that will be issued, in a centralised and electronic manner, by the Ministry of Economy, Energy and Business Environment). Thus, according to the additional clarification made public, the sequence of events will be as follows:
– The taxpayers declare within the affidavit that their revenues or receipts have been reduced by at least 25% in March of 2020, compared to the average of January and February 2020, or that they interrupted their activity as a whole or partially considering the mandatory provisions contained in the military ordinances issued during the state of emergency (obviously, subject to subsequent verification, verification that can cancel the benefits obtained in the urgent procedure);
– The Romanian state, by issuing the certificate for the state of emergency, confirms (finds) that a certain taxpayer either registered a significant damage of the activity, or interrupted its activity as a whole or partially. We are talking about administrative acts issued by the Ministry of Economy, Energy and Business Environment that will generate full legal effects until a possible revocation or cancellation [of course, within the term provided by art. 1 paragraph (6) of Law no. 554/2004].
In the absence of express contrary provisions, obtaining certificates for the state of emergency remains mandatory, and such a certificate could constitute, upon further verification, the evidence that the employer was indeed in a situation that would justify requesting and granting the support measures provided by art. XI paragraph (1) of G.E.O. no. 30/2020.