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Actuality

COVID-19: LEGAL FRAMEWORK OF THE MEASURES ADOPTED IN SPAIN

[Warning: this report is only for information purposes and does not constitute a legal opinion]

In many countries in the world we are experiencing an extraordinary situation caused by the health crisis generated by the COVID-19, which has led to the declaration of the state of alarm in Spain by the Government through Royal Decree 463/2020 of 14 March.

Due to this exceptional situation, the executive has been adopting measures through the well-known Decree-Laws.

It is inevitable that this type of situation will have legal consequences for individuals and companies. Consequently, a detailed study of the legal impact on the different areas of our system is being carried out. Tax, Litigation, Subsidies, Labour, Social Security, Societary and Decofinement Measures

TAX

I. What are the measures for relaxing deferrals before the Tax Agency?

Who can request them?

Individuals or legal entities whose turnover in 2019 does not exceed 6,010,121.04 euros may request deferment of their debts.

What debts can be deferred?

Debts corresponding to returns-settlements and self-assessments for which the deadline for presentation and payment is from 13 March 2020 to 30 May 2020, which would affect the returns for the first quarter and the monthly returns for February, March and April, can be deferred.

The postponement is extended to:

  • Debts for withholdings or payments on account
  • Corporate Income Tax instalments
  • VAT derivatives

What amount can be deferred and under what conditions?

Debts not exceeding 30,000 euros may be deferred without the need to provide guarantees. In the case of debts that exceed this amount, they can be deferred with the appropriate formalisation of a guarantee.

The debt may be deferred for six months and no interest will be accrued during the first three months of the deferment.

II. How do the measures affect tax deadlines?

In accordance with the ninth additional provision of Royal Decree 465/2020 of 17 March, which amends Royal Decree 463/2020 of 14 March, which declares the state of alert for the management of the health crisis situation caused by the COVID-19 (hereinafter “RDL”), tax matters are excluded from the suspension of terms and interruption of administrative deadlines, maintaining the ordinary deadlines for declarations, self-assessments and information statements.

However, it is agreed to suspend the following deadlines:

The following deadlines are extended until 30 April 2020, when they would have started before 18 March 2020 and would not have ended before that date.

  • The deadlines for payment of tax debts laid down in Article 62(2) and (5) of the General Tax Law (Ley General Tributaria, hereinafter ‘LGT’). These paragraphs refer to the voluntary payment of tax assessments made by the government and the deadlines for payment of debts during the enforcement period under the notified injunction, respectively.
  • Due dates and fractions of the deferral and instalment agreements already granted
  • The deadlines related to the development of the auctions and the awarding of goods referred to in articles 104.2 and 104 bis of the General Regulations on Collection, approved by Royal Decree 939/2005, of 29 July (these are, once the auction and awarding and payment have been opened, respectively).
  • The time limits for attending to requests, seizure proceedings and requests for information with tax implications, as well as the time limits for formulating arguments before acts of opening said proceedings or hearings, dictated in the following procedures:
  • Tax application procedures
  • Sanctioning procedures
  • Proceedings for declaration of invalidity
  • Procedures for refunding improper income
  • Procedures for rectifying material errors and for revocation

Within the administrative procedure of constraint, there will be no enforcement of guarantees on real estate from 18 March 2020 until 30 April 2020.

The expiry of the deadlines notified as from 18 March 2020 shall be extended until 20 May 2020, unless the deadlines granted by the rule are longer, in which case these deadlines shall apply.

If the taxpayer, however, is able to take advantage of the extension of the deadlines in the previous sections or without expressly reserving this right, and complies with the requirement or request for information with tax implications or presents his or her arguments, the procedure will be deemed to have been completed.

III. How do you calculate the time limits in tax matters?

The period between 18 March 2020 and 30 April 2020 shall not count for the purposes of the maximum duration of the procedures for the application of taxes, penalties and reviews processed by the State Agency of Tax Administration (AEAT), nor of the procedures initiated ex officio by the General Directorate of Cadastre, although during said period the Administration may promote, order and carry out the essential procedures.

Similarly, it is established that this period will not count for the purposes of prescription and expiry periods.

For the sole purpose of calculating the periods of limitation, in the appeal for reversal and in the economic-administrative procedures, the resolutions that end them will be understood to have been notified when an attempt to notify the resolution is accredited between 18 March 2020 and 30 April 2020.

The period for lodging economic-administrative appeals or claims against tax acts, as well as for appealing through administrative channels against the resolutions issued in economic-administrative proceedings, shall not commence until the end of said period, or until notification has been made, if the latter has taken place after that time..

IV. What tax measures are established by Royal Decree Law 14/2020 of 14 April, which extends the deadline for the submission and payment of certain tax returns and self-assessments?

The period is extended until 20 May 2020 for the presentation and payment of tax returns and self-assessments due from 15 April 2020 until 20 May 2020.

This measure is applicable to those taxpayers who present a volume of operations not exceeding 600,000 euros in 2019.

The direct debit of the direct debits that have been made up to 15 April 2020 will be made on 20 May 2020.

V. What tax measures are established by Royal Decree Law 15/2020 of 21 April on urgent complementary measures to support the economy and employment?

The possibility of changing to the option of the instalment payment modality provided for in Article 40.3 of Law 27/2014 of 27 November on Corporate Tax (hereinafter, “LIS”).

Possibility of renouncing the method of objective estimation in the financial year 2020 of personal income tax and/or special simplified VAT regime.

The reduction of the days of activity for the calculation of the fractioned payments in the objective estimation method of the Personal Income Tax and the quarterly quota of the simplified regime of the Value Added Tax as a consequence of the state of alarm is established for the tax period 2020.

It should also be noted that, in accordance with the first additional provision of RDL 15/2020, the deadlines listed in section II are extended until 30 May 2020.

It should also be pointed out that the one-month period established for lodging economic-administrative appeals and claims will commence on the day following 30 May 2020, i.e., the period will end on 30 June 2020.

Finally, it should be noted that the period between 14 March 2020 and 30 May 2020 shall not be counted for the purposes of the tax periods of limitation or lapse.

VI. What tax measures are established by Royal Decree Law 17/2020, of 5 May, which approves measures to support the cultural sector and of a tax nature to deal with the economic and social impact of the COVID-2019?

In the area of corporate tax (IS), for fiscal years beginning on or after January 1, 2020, the percentages and limits of the deduction for investments in film productions, audiovisual series and live performances of performing arts and music, as set forth in Article 36 of the LIS, are increased.

With regard to Personal Income Tax (IRPF), Law 49/2002, of 23 December, on the tax regime for non-profit organizations and tax incentives for patronage, is amended to increase by five percentage points the percentages of deduction provided for donations made by taxpayers of this tax as well as by taxpayers of Non-Resident Income Tax (IRNR) operating in Spanish territory without a permanent establishment.

Therefore, the resulting deduction percentages are as follows

For the first 150 euros, it increases from 75% to 80%. For the rest, it goes from 30% to 35%.

LITIGATION

PROCEDURAL MEASURES TO ADDRESS COVID-19 IN THE ADMINISTRATION OF JUSTICE

The Royal Decree 16/2020, of 28 April, contains a series of procedural and organizational measures to confront the coronavirus and its effects on the justice system.

Firstly, as a procedural measure, the days 11 to 31 August 2020 are going to be considered as working days for all procedural acts, except for weekends and festive days (in Spain, the courts are closed throughout the month of August and the whole month is considered as non-working month for procedural purposes, except for urgent actions). On the other hand, once the alert state declared in Spain is lifted, all the procedural periods and terms for appeal that were suspended by said state shall be recalculated from the beginning.

In addition, a special shortened procedure is established for the resolution of family law issues directly arising from the health crisis. The following will be decided by this procedure during the state of alert and up to three months after its termination:

  • Restoring the balance in the visiting arrangements or shared custody when the health crisis has prevented its strict fulfilment.
  • The revision of definitive measures on the charges of marriage, economic pensions between spouses and recognised maintenance for children when the economic circumstances of the spouses have substantially changed.
  • The establishment or the revision of the obligation to provide maintenance, where the economic conditions of the obligor have substantially changed.

Regarding labor law, it is stipulated that disputes over temporary layoffs involving more than five workers and dealing with suspensions and reductions in working hours shall be processed in accordance with the collective conflict proceedings.

Also, the Royal Decree establishes that certain files and proceedings, that are consequence of the Covid-19 crisis, will be dealt with preference (i.e., layoffs, recovery of working hours, procedures arising from the non-application of the subsidies provided to address the crisis…).

On the other hand, the Royal Decree also provides some bankruptcy and corporate measures, such as the possibility of submitting a proposal for modification or a new refinancing agreement in case such agreement was already approved. It is worth noting that, until the 31 of December 2020:

  • The debtor who is in a situation of insolvency will not have the obligation to apply for a declaration of bankruptcy.
  • Judges shall not process applications for the necessary bankruptcy proceedings that have been filed since the declaration of the state of alert.
  • An application for voluntary bankruptcy proceedings filed before 31 December 2020 shall be given priority, even if it is filed later than the application for a necessary declaration of bankruptcy.

Measures regarding to the bankruptcy proceedings declared within the two years following to the termination of the state of alert, such as the treating of the loans as ordinary credits, are also established.

For the purposes of determining the concurrence of the cause for dissolution of a company provided for in article 363.1 e) of the Companies Act, it is stipulated that the losses of the current financial year 2020 will not be taken into consideration. If the result for the 2021 financial year shows losses that reduce the net assets to less than half the share capital, the directors must call a meeting or any shareholder may request, within a period of two months from the end of the financial year that a meeting be held to dissolve the company, unless the capital is increased or reduced to a sufficient extent.

With regard to organizational measures in the administration of justice sector, the Royal Decree provides for the following:

  • The possibility of carrying out procedural acts remotely when the courts have the necessary equipment.
  • Limiting public access to oral proceedings.
  • Dispensation from the wearing of robes in court proceedings.
  • Attention to the public in the courts will be by telephone or e-mail or, if necessary, by appointment.
  • Creation of special judicial units to hear cases arising from Covid-19.

SUBSIDIES

ROYAL DECREE LAW 8/2020 OF 17 MARCH

(i) Financial assistance for tenants of primary residence

Who are the people the aid is aimed at?

All tenants who meet the condition of vulnerable persons in accordance with the provisions of Article 5 of Royal Decree 11/2020 of 31 March.

What documents are required to prove the condition of vulnerable person?

  • Certificate of unemployment with the monthly amount received.
  • Certificate of cessation of activity in the case of self-employed persons.
  • Family book and census certificate.
  • Simple note from the registry with the ownership of the family unit’s assets.
  • Declaration that the requirements have been met.

What does the aid regulated in art. 10 of the RD consist of?

The purpose of this aid is to grant rental aid through the direct awarding of a lease to individuals who are renters of their habitual residence and are in a situation of vulnerability as a result of the COVID-19, and who also have transitory problems in attending to the partial or total payment of the rent.

What is the amount and/or concept of the aid?

The amount will be up to 900 euros per month and up to 100% of the rental income or, if applicable, up to 100% of the loan taken out to pay the rent for the permanent home.

Which bodies will grant them?

The competent bodies in each Autonomous Community and in the cities of Ceuta and Melilla.

(ii) Guarantee line granted by the Ministry of Economic Affairs and Digital Transformation to facilitate access to credit and liquidity for companies and the self-employed to deal with the economic and social impact of the COVID-19

What are the objectives of the measure?

To cover new loans and other forms of financing formalised or renewed as of 18 March 2020, as well as renewals granted by financial institutions to companies and the self-employed to meet financing needs for the payment of salaries, supplier invoices, rental of premises, supply costs, working capital requirements and other liquidity needs such as those arising from the maturity of financial or tax obligations.

What is the measure and who are the recipients?

The measure consists of creating a line of guarantees of up to one hundred thousand million euros (100,000,000,000 euros) by the State for companies and self-employed workers with a registered office in Spain and from all sectors of activity, to deal with the economic and social impact of the COVID-19.

It is managed by the ICO (Instituto del Crédito Oficial) through financial institutions.

What requirements must applicants meet?

  1. Not be in a situation of delinquency
  2. Not be subject to a bankruptcy proceeding
  3. Not be in a crisis situation on 31.12.2019 – when the Temporary EU Aid Framework is applicable

What will be the coverage of the endorsement?

In the case of the self-employed and SMEs, the guarantee will cover 80% of the principal of new financing operations and renewals.

For the rest of the companies, which are not considered SMEs, the guarantee will cover 70% in the case of new loan operations and 60% for renewals.

ROYAL DECREE 11/2020 OF 31 MARCH

(i) Measures relating to tenancies of permanent residence: application for a moratorium on rent payments

Can the tenant in a vulnerable situation request a moratorium on the payment of rent?

A tenant in a situation of vulnerability may request a temporary and extraordinary postponement of the payment of rent from the landlord who is a public housing company or entity or a large holder (owner of more than ten urban properties, excluding garages and storage rooms, or a built area of more than 1,500 m2) within one month from 2 April.

Is the landlord obliged to grant this moratorium?

The landlord must express his decision to the tenant within 7 working days, which can only be one of the following

a) Reduction of 50% of the rental income for the duration of the state of alarm and the following monthly payments if necessary due to the vulnerability of the tenant (maximum total of 4 months).

b) Moratorium on the payment of rent which will be applied automatically and which will affect the duration of the state of alarm and the following monthly payments, extendable one by one if necessary due to the vulnerability of the tenant (maximum total of 4 months). The rent will be deferred from the next monthly payment, by means of the instalment of the quotas for at least 3 years, no penalties or interests can be applied to this instalment.

What happens if the lessor is not a large holder, company or public housing entity?

In this case, the landlord and the tenant can reach a voluntary agreement. If they do not reach this agreement, within one month from 2 April, tenants who are in a vulnerable situation may request a temporary and extraordinary postponement of the payment of rent.

(ii) Summary of financial assistance for tenants of primary residence

Who are the people the aid is aimed at?

All tenants who meet the condition of vulnerable persons in accordance with the provisions of Article 5 of Royal Decree 11/2020 of 31 March.

What documents are required to prove the condition of vulnerable person?

  • Certificate of unemployment with the monthly amount received.
  • Certificate of cessation of activity in the case of self-employed persons.
  • Family book and census certificate.
  • Simple note from the registry with the ownership of the family unit’s assets.
  • Declaration that the requirements have been met.

Who grants the aid regulated in article 9 of the RD and what does it consist of?

The Ministry together with the Official Credit Institute (ICO).

What is the purpose of the aid?

The aid must be used to pay the rent for housing use, up to a maximum of 6 monthly rent payments.

How long must it be paid back?

The repayment period will be up to 6 years, which can be extended exceptionally for another 4 years.

What are the conditions?

Without any type of expense or interest for the applicant.

What does the aid regulated in article 10 of the RD consist of?

The purpose of this aid is to grant rental subsidies through the direct awarding of a lease to individuals who are renting their usual residence and are in a situation of vulnerability as a result of the COVID-19, and who also have temporary problems in paying part or all of the rent.

What is the amount and/or concept of the aid?

The amount will be up to 900 euros per month and up to 100% of the rental income or, if applicable, up to 100% of the loan taken out to pay the rent for the permanent home.

Which bodies will grant them?

The competent bodies in each Autonomous Community and in the cities of Ceuta and Melilla.

(iii) Consumer rights in times of the Coronavirus

What can I do as a consumer when faced with a contract whose execution becomes impossible as a result of the alarm condition?

Consumers will have the right to terminate those contracts for the sale of goods and the provision of services that cannot be performed as a result of the restrictive measures adopted in the state of alarm, with the established conditions and deadlines.

If my flight has been cancelled, do I have the right to a refund? and to compensation?

Passengers will have the right to a refund of their tickets when the company cancels their flights. However, you will not have the right to ask for compensation as the cancellations are due to an extraordinary circumstance, and therefore beyond the control of the company.

What happens with the cancellation or change of date of cultural or leisure events such as plays, museums, concerts…?

The consumer may opt for a refund or an exchangeable voucher as long as it is feasible, since changes of date or cancellations of such cultural events will depend on the organization of the event.

ORDER TMA/336/2020 OF 9 APRIL

What is the objective of this new Program?

To address situations of extreme urgency, which until now were not resolved by the State Housing Plan 2018-2021 program, regulated by Royal Decree 106/2018 of 9 March, which it replaces for being ineffective in its design to address the impact of the pandemic that is being suffered and thus, gain immediacy in the solution to this new reality.

The aim is to provide housing solutions that can be implemented quickly and by direct adjudication when necessary with the assessment of the corresponding social services.

What new features does it incorporate?

  • The new “aid programme to help minimise the economic and social impact of COVID-19 on the rent of permanent housing”.
  • The programme of assistance to persons in a situation of eviction or the launch of their habitual residence is abolished and replaced by the programme of assistance to victims of gender violence, persons subject to eviction from their habitual residence, homeless persons and other particularly vulnerable persons regulated in Article 4;
  • The programme for the promotion of rental housing regulated in Chapter V of Royal Decree 106/2018 regulating the State Housing Plan 2018-2021 is amended in accordance with Article 5.

What is the housing solution?

It is the provision of a dwelling to be occupied under a renting, use assignment or any other temporary occupation regime admitted by law.

Besides the housing solution, is there any other type of aid?

Economic aid may be granted as long as it is approved by the social services of the Autonomous Community.

What is the amount of this type of aid?

  1. Up to 600 euros per month and up to 100% of the rent or price of occupation of the property, established. In cases duly justified by the body granting the aid, it may reach up to 900 euros per month and up to 100% of the rent or occupancy price, as established.
  • Up to 200 euros per month to cover maintenance, community fees and basic supplies, with a limit of 100%.

How long can these economic aids be obtained?

For a maximum period of five years.

Does Order TMA/336/2020 of 9 April modify the State Housing Plan 2018-2021?

Yes, Article 5 of Order TMA/336/2020 of 9 April modifies, as a result of the aid programme established in Article 4, Articles 25 to 32 of the programme for the promotion of rental housing stock regulated in Chapter V of Royal Decree 106/2018, which regulates the State Housing Plan 2018-2021.

ROYAL DECREE-LAW 15/2020, OF 21 APRIL

(i) Measures for leases other than residential or industrial

What measures are foreseen in this RD 15/202 of 21 April for rentals other than for housing or industry?

The measures to be applied will differ according to whether the lessor is considered a “large holder” or not:

  • If the lessor is a “large holder”: the moratorium on the payment of rental income is obligatory. In other words, whenever the tenant requests it, the landlord must automatically defer payment of the rent according to the term and conditions set forth in RD 15/2020. 
  • If the landlord is not a “large holder”: The moratorium is not obligatory. The tenant can request it from the landlord, but the landlord is not obliged to grant it.

What is the deadline for requesting this moratorium?

It must be requested within one month from the entry into force of this RD.

For how long can the moratorium be requested?

The moratorium in the payment of the rent is for the months in which the state of alarm lasts and following months if it is necessary with the maximum limit of 4 months. That is to say, in no case can the moratorium exceed 4 months.

Can any tenant of premises or properties other than housing apply for this moratorium?

No. The measures adopted in this Royal Decree are aimed at tenants (individuals or legal entities) of a rental contract for use other than housing that meets the requirements of art. 3 of RD 15/2020).

(ii) Urgent complementary measures to strengthen the financing of companies

Article 6 provides for the postponement of the instalments on loans granted by the E.P.E. Instituto para la Diversificación y Ahorro de la Energía (IDEA) under its subsidy or reimbursable aid programmes, offering the beneficiaries of these programmes – affected by the COVID-19 crisis – the possibility of granting postponements of the instalments on loans taken out (provided that they meet certain conditions) for maturities between March and June 2020 (included).

LABOUR

EMPLOYMENT-RELATED MEASURES

Due to the paralysis of many companies, both large and small, the Council of Ministers adopted measures to try to achieve greater flexibility in the temporary adjustments of the workforce. It also reflected the possibility of a Temporary Employment Regulation (ERTEs) file to try to mitigate and avoid redundancies, this being the most striking measure in the labour field.

1. What do I do if my business has had to close due to the COVID-19 crisis and my employees cannot telework?

The Workers’ Statute (henceforth, the ET) provides a solution for companies affected by the decline in their services, currently, due to the COVID-19 pandemic. Article 45 i) of this regulation provides for the suspension of the contract (ERTE), whose regulation has been made more flexible by Royal Decree Law 8/2020 of 17 March, on extraordinary urgent measures to deal with the economic and social impact of the COVID-19.

2. Can I terminate contracts or dismiss workers because of COVID-19?

Royal Decree Law 9/2020, of 27 March, which adopts complementary measures in the field of employment to mitigate the effects of the COVID-19, expressly prohibits them by not considering force majeure and the economic, technical, organizational and production causes caused by the COVID-19 as justifying.

This means that dismissals can be made but companies will subsequently be obliged to pay the worker the maximum compensation for unfair dismissal (33 days of salary per year worked, instead of the 20 days per year worked of the dismissal for objective reasons).

The recommended measure for companies is to carry out an ERTE (temporary employment regulation measures) with the consequent suspension of the contract or reduction of working hours according to the needs of the company, as explained below.

3. What does the suspension or reduction of the working day in an ERTE mean?

The suspension of the contract implies the interruption of the obligation to work, as well as the interruption of the right to remuneration during the time the ERTE lasts (art. 45.2 ET).

The reduction of the working day implies the reduction of the working hours, as well as the proportional reduction of the salary, according to the needs of the company and during the time the ERTE lasts.

4. So my employees won’t be paid or will be paid less?

In the event of suspension of the contract, employees will be entitled to receive unemployment benefit (Article 262 of the General Law on Social Security) consisting of 70 percent of its regulatory base during the first 180 days and 50 percent as of the 180th day.

In the event of a reduction in the working day, they will receive the proportional part in which they have been reduced in salary.

5. Can I apply an ERTE in any case? Are there types of ERTE?

If your company has been affected in any way by the COVID-19, you can apply an ERTE.

However, depending on the degree of affectation, there are two types of ERTE:

  • If your company has been directly affected by COVID-19, you must apply an ERTE due to force majeure. The ERTE is approved by the labour authority and can be extended until 30 June 2020.
  • If the company has been affected indirectly, you must apply an ERTE for economic, technical, organizational and/or production reasons. The ERTE is approved by the employer and it is preferable that it be agreed with the workers. The end date of the ERTE is the term referred to in the company’s final communication.

An ERTE can be applied first by force majeure as long as the effect of the COVID-19 is direct and more intense. Subsequently, the company can initiate an ERTE for economic, technical, organizational and/or production reasons that allow a transition to normalcy in the company.

Within the same company, the work of people not affected by the consequences of COVID-19 can be maintained. Other workers whose activity is affected may be in an ERTE. In these cases of partial ERTE, partial exemptions in social security contributions are established:

– For workers who resume their activity, the exoneration will be

– 85% in May and 70% in June: companies with less than 50 workers on February 29, 2020

– 60% in May and 45% in June: companies with 50 or more workers

-With respect to workers who continue with their suspended activities, in an ERTE of partial force majeure, the exoneration will be

– 60%, in May, and 45% in June: companies with less than 50 workers

– 45% in May and 30% in June: companies with 50 or more employees

6. What are the specialities regulated for ERTEs due to force majeure, with respect to the procedure set out in the regulations governing these cases?

Royal Decree-Law 8/2020 stipulates that the company’s application to initiate the procedure must include a report and documentation accrediting the direct relationship between the loss of activity and the COVID-19, and that it must notify its workers of the initiation of the procedure.

The labor authority will determine by resolution within 5 days from the request, the existence of force majeure motivating the suspension of contracts or the reduction of the workday that will take effect from the date of the event causing the force majeure, after a report, if appropriate, from the Labor and Social Security Inspectorate whose request will be optional for the labor authority, will be evacuated within a non-renewable period of five days

7. What are the specialities regulated for ERTE’s for economic, technical, organisational and production reasons, with respect to the procedure set out in the regulations governing these cases?

In these cases, where the company decides to suspend the contract or reduce the working day for economic, technical, organizational and production reasons related to the COVID-19, a series of procedures must be followed with the workers.

When there is no legal representation of the workers, the committee representing them for the negotiation of the consultation period, which must be set up within a non-renewable period of 5 days, will be made up of the most representative trade unions in the sector to which the company belongs or by three workers from the company itself, chosen in accordance with the provisions of Article 41.4 of the Workers’ Statute if such representation is not set up.

The period of consultation between the company and the workers’ representatives or the representative committee must not exceed a maximum of seven days.

8. Do I have to pay social security contributions for my workers during this period?

In the case of ERTE due to force majeure, the employer is exonerated from the employer’s social security contributions. However, the case of force majeure must always have been accredited and approved by the labour authority. This exemption will be 75% for companies with 50 or more workers.

In ERTEs for economic, technical, organizational and production reasons, there is no exemption and the employer must continue to pay the full social security contributions.

9. What happens when my company resumes activity if I have taken out an ERTE?

All those companies that have availed themselves of any of the extraordinary measures provided for in Royal Decree-Law 8/2020 in the field of employment are obliged to maintain employment for a minimum period of 6 months from the time the activity is resumed.

10. What happens if the suspension by the ERTE affects temporary contracts?

The suspension of temporary contracts (including training, relief and temporary contracts) will mean the interruption of the calculation, the duration of these contracts and the reference periods equivalent to the suspended period, in each of these contractual modalities of the workers affected by them.

11. Am I obliged to apply teleworking in my company?

Royal Decree Law 8/2020, of 17 March, on urgent extraordinary measures to deal with the economic and social impact of COVID-19 establishes the preferential nature of distance working, and the company must adopt the appropriate measures whenever it is technically and reasonably possible and if the necessary adaptation effort is proportionate. Similarly, it is established that distance working, as well as the adoption of other organizational system measures that allow activity to be maintained by alternative mechanisms, must take priority over temporary cessation or reduction of activity.

12. What are the exceptional measures regarding flexibility and reduction of the working day?

Article 6 of Royal Decree Law 9/2020, of 27 March, which adopts complementary measures in the field of employment to mitigate the effects of the COVID-19, establishes a series of measures for the reconciliation of family and working life called the “MECUIDA Plan”, which can be applied to workers who can prove that they have a duty of care to their spouse or partner, or to family members up to the second degree of consanguinity of the worker.

12. 1. In what cases can workers take advantage of the “MECUIDA” plan?

In those cases in which they can prove that their spouse or partner, or family members up to the second degree of consanguinity:

  • Requires personal and direct care due to illness, disability or age as a direct consequence of COVID 19.
  • Has been affected by the closure of educational centers or of any other nature that provides care or attention.
  • When the person who until now was in charge of that care or direct assistance cannot continue to do so due to causes related to the COVID-19.

12. 2. What are the measures included in the “MECUIDA” plan?

The measures contemplated are two:

  1. Adaptation of working hours: the right to the distribution of working hours or any other aspect of working conditions whose modification makes it easier for the worker to provide the necessary care, provided that the change can be made in a proportionate and reasonable manner taking into account the exceptional and temporary nature of the COVID
  2. Reduction of the working day: for those situations foreseen for legal custody ( art. 37.6 and 7 ET) the right to a special reduction of the working day, with a proportional reduction of the salary when the exceptional circumstances mentioned above occur, as long as it is communicated to the company 24 hours in advance. The reduction of the working day may be 100% but must be justified and reasonable and proportionate, also taking into account the situation of the company. In the case of caring for a family member, it is not necessary for the latter not to carry out a paid activity.

12. 3. And what happens in cases where the worker was already enjoying an adaptation/reduction of the working day through conciliation?

In these cases, the worker must either temporarily renounce it or exercise his or her right to have the terms under which they were enjoyed changed, exclusively for an exceptional period of time during the health crisis, proving the specific care needs to be provided by the worker and having to be adjusted to the organizational needs of the company.  

SOCIAL SECURITY

1. Can I request a deferral for the payment of social security debts?

Royal Decree Law 11/2020 of 31 March, which adopts additional urgent measures in the social and economic field to deal with COVID-19, stipulates that all companies and self-employed workers who have been affected by COVID-19 and who do not have any other previous deferral in force can request a deferral of their Social Security debts at a reduced interest rate of 0.5%. which they would have to pay between April and June, provided that they request it before the first ten calendar days of each of the regulatory periods of entry, in order to avoid invoicing of the contribution.

2. What does the moratorium on social security contributions consist of?

Royal Decree-Law 11/202 has empowered the General Treasury of Social Security to grant companies and self-employed workers a moratorium without interest or surcharges on contributions to be made in May, June and July for up to six months.

3. Which companies can benefit from the moratorium on social security contributions?

This moratorium cannot be requested by those companies that have been exonerated from paying social security contributions by their workers affected by ERTEs due to force majeure because of the coronavirus.

Furthermore, this moratorium is only applicable to companies and self-employed workers whose economic activity is included in the following codes of the National Classification of Economic Activities (CNAE-2009):

119 (Other non-perennial crops).

129 (Other perennial crops).

1812 (Other printing and graphic arts activities).

2512 (Manufacture of metalwork).

4322 (Plumbing, heating and air conditioning installations).

4332 (Installation of carpentry).

4711 (Retail trade in non-specialised stores, predominantly in food, beverages and tobacco products)

4719 (Other retail sale in non-specialised stores)

4724 (Retail sale of bread, bakery and confectionery products in specialised stores)

7311 (Advertising agencies)

8623 (Dental activities)

9602 (Hairdressing and other beauty treatment).

4. What does the assimilation of periods of isolation, contagion or restriction in the exits of the workers from the municipality of residence consist of to the “work accident” as a consequence of the COVID-19?

Royal Decree Law 6/2020, of 10 March, which adopts certain urgent measures in the economic field and for the protection of public health, establishes the aforementioned assimilation as an exception and only as regards the economic benefit of temporary incapacity for those cases of total confinement, in periods of isolation or infection of workers caused by COVID-19 and in those cases where workers who are obliged to provide essential services in a location other than their home cannot do so because the population where they live has been expressly confined by the competent authority, cannot work telematically and is not entitled to receive any other public benefits. The effects will be from the beginning of the confinement situation, and by means of the corresponding discharge.

5. What is the extraordinary benefit for cessation of activity for those affected by the declaration of the state of alarm for the management of the health crisis situation caused by the COVID-19?

Royal Decree-Law 8/2020 of 17 March on urgent extraordinary measures to deal with the economic and social impact of the COVID-19 establishes that self-employed workers who are affected by the COVID-19 will be entitled to an extraordinary benefit for cessation of activity or reduction in turnover. This benefit is of an exceptional nature and the deadline for applying for it has been extended to the last day of the month following the end of the state of alarm by Royal Decree Law 11/2020 of 31 March.

5.1. Who can apply for the benefit?

  • Self-employed workers included in the Special Scheme for Self-Employed Workers, self-employed agricultural workers included in the Special System for Agricultural Self-Employed Workers and self-employed workers included in the Special Scheme for Seafarers whose activities are suspended or who have not ceased, its turnover in the calendar month preceding the month in which the service is requested is reduced by at least 75 per cent compared with the average turnover in the previous calendar half-year or when its average turnover in the months of the production campaign preceding the month in which the service is requested is reduced by at least 75 per cent compared with the same months in the previous year’s campaign
  • Self-employed workers who carry out activities in activities specified as information and communications activities or artistic, recreational and entertainment activities, provided that their activity does not cease but whose turnover in the calendar month prior to that in which the benefit is requested is reduced by at least 75% in relation to that carried out in the previous 12 months.

5.2. What requirements must be met?

To be affiliated and registered on the date of declaration of the alarm status.

SOCIETARY

I. Momentary suspension of the cause of dissolution for losses

Specifically, the new regulation establishes that, “for the sole purpose of determining the concurrence of the cause for dissolution provided for in Article 363.1 e) of the Companies Act (“LSC”), the losses for the current year 2020 shall not be taken into consideration. If the result for 2021 shows losses that reduce the net assets to less than half of the share capital, the directors must call a meeting or any shareholder may request, within two months of the end of the financial year, that a meeting be held to dissolve the company, unless the capital is increased or reduced sufficiently”. The above provision is without prejudice to the duty to apply for a declaration of bankruptcy in accordance with the provisions of the RDL.

II. Participative loans and cash flow.

When faced with the possibility of early repayment of a participating loan, the new Spanish regulations on urgent measures make early repayment conditional on an increase in equity for the same value as the repayment. The lender partner is required to make sure that it is not too late to put back what it withdraws. In other words, to stay in the same place.

The great contribution of the extraordinary regulation is the updating of assets. The updating of values in assets is an exceptional resource because it contradicts the basic rule of book value registration. Thus, authorising it in general is an extraordinary measure.

Until the appearance of this new regulatory provision, the equity loan was an imported type that was characterised by the fact that the remuneration was linked to the company’s results. The new regulation gives a charter to this speciality of remuneration and does what it really wants it to be, setting a new typological anchorage, attributing to it the function of strengthening the equity.

By assigning this function of more equity to the participative loan, it adds the incomprehensible requirement of preventing its early amortization if the amount amortized is not contributed to the equity.

Here we rule out the impact of the collection that does not come from an asset revaluation. Although, by the way, its literal intelligence leads to the denial of the early amortization of the participative loan that counteracts an effective contribution of value when the figure of own funds that it is reinforcing comes from an updating of values in the assets. There is no relationship between the two that could explain why in such a case early repayment would not be possible even if the rule of providing what is being repaid is complied with.

Making this standard understandable leads to the identification of the case in which the requirement becomes meaningless and cannot be operational. And the meaning of the requirement and when it cannot be imposed is linked to the purpose of RD96. The strengthening of equity. The thesis defended in this note is that the participative loan can be freely amortized when there is no need to reinforce the company’s own funds.

III. Insolvency proceedings as a solution to obtain post-covid business viability

The insolvency proceedings are a solution to ensure the viability of the company paralyzed by the health crisis. The contribution that the bankruptcy makes to this viability is multiple. It puts the previous debt in order, allows real savings in the wage bill and opens the door to investors without the partners or shareholders, and can even lead to the transfer of the productive unit. The deadline for its presentation in the two months following the cessation of the state of alarm eliminates the guilt and, therefore, the risk of disqualification or liability of the administrators.

The cessation of economic activity requires work to be done to reactivate it. This reactivation is only possible if the company will be able to maintain its operations.

At a time when it seems that an end date for the state of alarm and a staggered plan for the recovery of activity can be glimpsed, it is necessary to think about what measures to mitigate the economic downturn of the company need to be adopted.

It may be that the measures to mitigate the wage bill in the suspension or reduction of working hours file are not sufficient, that the company cannot assume the cost of social security, it may not be that an agreement is reached with the banks or it may be, as we are seeing, that the partner or shareholder cannot cover the deficit.

In a situation like this, the solution is to go into bankruptcy. Competition as a restructuring solution. The bankruptcy as a way of reactivation and viability.

The bankruptcy rules introduced by the health crisis regulations are temporary, with validity limited to the state of alarm and two more months. They cannot be understood as a modification of the bankruptcy law. Therefore, they are the opportunity offered to the insolvency proceedings in this short period of time as a solution for the forecast of illiquidity of Spanish companies.

The first insolvency measure of the RD-L 8/2020 is to suspend this duty to apply for insolvency in the following cases:

  • In a situation of current insolvency within two months from the date on which the insolvency situation was known or should have been known. It therefore affects Article 2.2. and Article 5 LC.
  • In a situation of current insolvency when no agreement can be reached within a period of time to achieve any of the pre-bankruptcy remedies, such as a refinancing agreement, out-of-court settlement agreement or advance proposal of a settlement. Article 5bis LC is affected here.

The elimination of the blame for the delay in the presentation of the insolvency proceedings in the case of current insolvency affects both the presumption of Art. 165.1.1 LC and the responsibility of the administrative body ex Art. 176 LC.

It leaves aside the debtor’s power to apply for voluntary bankruptcy due to current or imminent insolvency.

It eliminates the power of creditors to request the necessary insolvency proceedings from the debtor in the event of current insolvency. This effect operates by preventing the filing of necessary bankruptcy applications and giving priority to the application for voluntary bankruptcy, even if it is subsequent to the necessary bankruptcy application, within the period of the state of alert and two more months.

The advantage of exoneration from liability is also emphasised by relaxing the liability of the persons on the administrative body if they do not call a meeting of the shareholders or members within two months to decide on the dissolution or bankruptcy of the company affected by losses that reduce the share capital to below 50%.

A second advantage is that no causal connection is imposed between the situation of economic paralysis caused by the health crisis and the insolvency that gives rise to the application for bankruptcy.

The question is how to approach the bankruptcy in an appropriate manner. Here it is necessary to look at the objectives of the restructuring of each company. But in general terms we can point to three main chapters.

  • The previous debt that will form the bankruptcy liabilities, the bankruptcy debt.
  • The savings in the wage bill.
  • The opening of the company to new investors against the will of the current partners.

The appropriate approach to these elements must guarantee the viability of the company and the adherence of the creditors.

The bankruptcy proceedings to obtain the objectives set are the advance proposal of agreement with the bankruptcy application and the collective file of Article 64 of the Law.

The advance proposal of agreement includes the treatment of the bankruptcy debt, the debt prior to the date of application for the bankruptcy, which will be the old debt as well as the debt generated during the paralysis, which is the proposal contained in the Payment Plan, and the viability plan of the company, which justifies going to the file of Article 64 LC.

The application for the insolvency proceeding with an advance proposal of agreement is the option of the voluntary insolvency proceeding regulated in art. 100 LC.

The anticipated proposal for an agreement is the appropriate action in the framework of the companies affected by the Covid standstill19. For the agility in the processing.

The tender is a solution to ensure the viability of the company paralyzed by the health crisis. The contribution that the tender makes to this viability is multiple. It puts the previous debt in order, allows real savings in the wage bill and opens the door to investors without the partners or shareholders, and can even lead to the transfer of the production unit. And within the term of the Covid19 regulation, the two months following the cessation of the state of alarm, without culpability.

IV. Updating of urgent measures on the legal regime of capital movements and economic transactions abroad

The purpose of updating the measures on capital movements and economic transactions abroad remains the same: to mitigate the economic and social impact of the extension of the state of alert due to the spread of the disease, while maintaining the protection of the families, self-employed workers and companies most directly affected as a priority:

Procedure for processing administrative applications.

The new regulatory provisions establish that, on a transitional basis, the procedure for processing applications for prior administrative authorisation will be through the simplified processing of the procedure provided for in Article 96 of Law 39/2015, of 1 October, on the Common Administrative Procedure of Public Administrations, for foreign direct investment transactions with respect to

  • that accredits the existence of an agreement between the parties or a binding offer in which the price was fixed, determined or determinable prior to the entry into force of Royal Decree Law 8/2020 of 17 March,
  • 1 million and less than EUR 5 million until the regulations implementing Article 7(a) enter into force. Law 19/2003, therefore not requiring prior authorization for operations of less than 1 million euros.

Extension of the scope of application of the suspension of the foreign investment liberalization regime and validity of the suspension.

The second amendment refers to the extension of the application of the suspension of the regime of liberalization of certain direct foreign investments in Spain made by investors resident in European Union and European Free Trade Association countries, in those cases where the investors are controlled by entities resident outside that territorial area and for those investments made in the main strategic sectors of our country for reasons of public security, public order and public health.

Firstly, foreign direct investment in Spain includes all investments made by residents of European Union or European Free Trade Association countries who own or ultimately control more than 25% of the investor’s capital or voting rights, or when they exercise control over the investor by other means, whereby “the investor holds a stake equal to or greater than 10% of the capital stock of the Spanish company, or when as a result of the corporate transaction, legal act or business, the investor effectively participates in the management or control of the company.

The regulations also establish the amount below which foreign direct investment transactions would be exempt from the prior authorization regime.

Finally, it was agreed to eliminate paragraph 6 of the aforementioned Article 7 bis, which stipulated that the suspension would be in force until it was lifted by a Council of Ministers’ Agreement

DECONFINEMENT MEASURES IN SPAIN

The Spanish Government has established a deconfinement plan that consists of 4 phases that help recover the social and economic losses but consider medical criteria to avoid an outbreak of the coronavirus. The different territories can apply for its transition from one phase to another but, ultimately, the Spanish Government will decide whether a territory can change of phase or not.

Except for the Islands, all the Spanish territory started on phase 0 when the plan was released on April 28th 2020 and on May 11th some parts of Spain will transition to phase 1 while others, like Barcelona and Madrid, will stay in phase 0 as they do not meet the medical criteria.

The most important features of the different phases consist of the following:

  • Phase 0: working from home when it can be done is preferable; walks and exercise outside are allowed with a schedule and within the municipality; commercial establishments can attend its clients by appointment and restaurants can open for home delivery.
  • Phase 1: working from home is preferable; social contact with limited groups of people is allowed, limited occupation of vehicles, wakes for a limited number of family members; schools and university will open only to be disinfected; generalised opening of commercial establishments that are not in malls with its capacity limited to 30% and special opening hours for those over 60; restaurants can open their terrace limited to 50% of its capacity; opening of hotels limiting the use of common spaces; places of religious worship can be opened with a limitation of 1/3 of its capacity.
  • Phase 2: working from home is preferable; social contact with a wider group of people is allowed, trips to second homes are allowed as long as they are in the same province, weddings for a limited number of attendees, wakes for a less limited number of family members, with limited capacity; opening of childcare up to 6 years for parents who can not work from home, the ending courses can start their classes with limited capacity and it will be voluntarily for the students; generalised opening of all commercial establishments with its capacity limited to 40% and special opening hours for those over 60; restaurants can open limited to 1/3 of its capacity; places of cultural and leisure activities (i.e., cinema, museum, theatre) can be opened with its capacity limited to 1/3; places of religious worship can be opened with a limitation of 1/3 of its capacity.
  • Phase 3: re-entry protocols to companies with due measures, social contact with everyone, wakes and wedding for a wider number of people; opening of commercial establishments with its capacity limited to 50%; restaurants can open limited to 1/2 of its capacity; places of cultural and leisure activities can be opened with limited capacity 1/2.