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To help small businesses weather the crisis caused by COVID-19, the government and certain local authorities have taken a number of measures, including the creation of a solidarity fund and the deferral of rent and utility payments.
The Solidarity Fund: Who Is Eligible? Eligible for the Solidarity Fund are very small businesses, self-employed individuals, micro-entrepreneurs, and independent professionals with fewer than ten employees, generating less than one million euros in revenue and an annual taxable profit of less than 60,000 euros, who: – are prohibited from receiving the public pursuant to Article 8 of the Decree of March 23, 2020; or – have experienced a loss in revenue of at least 50% during this period compared to the same period in 2019. The amount of this aid is set at €1,500. Additional aid may be granted by the Regional Council of the area where the business is located. This aid, ranging from €2,000 to €5,000, must be applied for by May 31, 2020, and is available to businesses that: – have received the first tranche of the fund (€1,500 or less) – employ, as of March 1, 2020, at least one employee on a permanent or fixed-term contract – are unable to pay their debts due within thirty days and the amount of their fixed expenses, including commercial or business rent, due for the months of March and April 2020 – have applied, as of March 1, 2020, for a bank loan from the bank where they were customers, and which was either denied or went unanswered by the bank. To qualify for this additional assistance, the business must provide: – a sworn statement certifying that the business meets the conditions set forth in the decree and that the information provided is accurate; – a brief description of its situation, accompanied by a 30-day cash flow forecast, demonstrating the risk of insolvency; – the amount of the loan that was denied, the name of the bank that denied it, and the contact information for the bank’s representative handling the matter.
Deferral of Rent and Utility Bills Due During the State of Public Health Emergency
Certain businesses eligible for the solidarity fund financed by the State and the regions may be entitled to defer payment of their rent, water, electricity, and gas bills.
These provisions are governed by the Amended Finance Act of April 25, 2020. When a landlord waives the rent owed by a business in financial difficulty for the period from April 15 to December 31, 2020, these amounts are not considered taxable income, either as real estate income or as non-commercial profits.
As for the waiver of rent and related charges pertaining to properties leased to a business that has no arm’s-length relationship with the landlord, granted during the same period, such amounts are fully deductible from net income. The business will benefit from:
In other words: Businesses experiencing difficulties paying their water, gas, and electricity bills may submit a request for an amicable deferral to their water, gas, or electricity provider.
The collection of rent and charges is suspended as of April 1, 2020, and for subsequent periods during which business operations are suspended. When business operations resume, these rents and charges will be subject to payment deferrals or installment plans without penalties or late fees.
The business must provide not only a sworn statement certifying compliance with the conditions set forth in the decree but also confirmation of receipt of their application for eligibility for the solidarity fund. Naturally, a large number of businesses will not be eligible for these provisions. For this reason, the government has encouraged tenants to reach out to their landlords to try to find a negotiated solution. If landlords refuse to make concessions, tenants of businesses that are prohibited from serving the public should be able to suspend their rent payments by invoking force majeure or the defense of non-performance. They could thus be relieved of their obligation to pay rent if such payment has been made impossible by the outbreak of the coronavirus pandemic. However, if the fulfillment of their obligation is merely made more difficult by the public health situation, tenants will not be able to invoke force majeure and will have to seek other remedies.
Nevertheless, the various mechanisms provided for in the Civil Code do not allow tenants to avoid their obligations to pay rent and charges, which is why negotiation should be prioritized. More information is available on the Ministry of Economy and Finance’s website here.
