How to obtain an idle time benefit due to COVID-19 crisis

No one doubts that the crisis of COVID-19 has had and continues to have an extremely negative impact on the global economy. Some industries have been less affected by this crisis, while others have suffered very seriously, and many businesses wouldn’t be able to survive without state support. In order to quickly respond to the economic consequences of the COVID-19 crisis and provide support to industries, enterprises and their employees, on March 20, 2020, Latvia adopted the law “On measures to prevent and overcome the state threat and its consequences as a result of the spread of Covid-19.” The law provides for a number of tax support measures for enterprises, their employees and self-employed persons.

Based on this law, the Cabinet has drafted the Regulations No. 165 on COVID-19 Crisis-Affected Employers Who May Qualify for Idle Time Benefits and Distribution of Tax Payments or Deferral for Up to Three Years (the “Regulations”) which came into force on March 28 this year.

The Regulations establish the criteria by which employers and taxpayers affected by the crisis are determined. Besides, the Regulations establish the procedure in which applications are to be submitted to receive an idle time welfare allowance and distribution over the payment term of overdue tax payments or deferrals for up to three years.

In the understanding of the Regulations, an idle time welfare is paid if the employer affected by the crisis cannot provide the employee with work. Idle time is the time period from March 14 to May 14, 2020.

To receive an idle time welfare, the following categories of employers and the taxpayer affected by the crisis are entitled to apply:

• if their income from economic activity in connection with the distribution of COVID-19 in March or April 2020 decreased by at least 30% compared with the corresponding month of 2019;
• if their income from economic activity in connection with the distribution of COVID-19 in March or April 2020 decreased by at least 20% compared with the corresponding month of 2019 provided they meet at list one of the following criteria:

a) the export volume of the enterprise in 2019 amounted to 10% of the total turnover or at least 500,000 euros;

b) the average monthly gross salary paid by the company in 2019 is at least 800 euros;

c) long-term investments in fixed assets as of December 31, 2019 amount to at least 500,000 euros.

To apply for an idle time welfare, a crisis-affected employer, by April 25, 2020 must submit an application to the SRS (through EDS) for the period from March 14 to March 31, 2020, and then until the 25th day of the following month. The following information must be indicated in the application:

• name and registration number of the employer affected by the crisis;
• period of inactivity;
• the grounds for the employee’s idle time due to circumstances that the employer had under the influence of the crisis;
• information about the employee who has an idle time (name, surname, personal code, idle time period, bank account number);
• confirmation that the employee for whom the idle time welfare is requested is not on sick leave and within a month after submitting the application will not be dismissed at the initiative of the employer.

An employee is paid the idle time welfare of 75% of the average monthly gross salary for the previous six months before the declaration of emergency, or according to the actual declared data on employees for the previous six months, but in the amount of not more than 700 euros per calendar month.

SRS pays the idle time welfare for one calendar month within five calendar days after receiving the application by transferring the welfare to the employee’s account specified in the application.

SRS shall not pay the idle time welfare in the following cases:

• if the employer affected by the crisis has not submitted to the SRS all tax returns and annual reports for the last 12 months before the emergency;
• if the employer affected by the crisis as of the day the application is submitted had a tax debt of more than 1000 euros and has not been granted a prolongation of the payment term, or an agreement on voluntary payment of the tax has been reached;
• if the employer affected by the crisis is expelled or has been expelled from the register of VAT payers in the past two years or has stopped or has suspended business activities;
• if the employer affected by the crisis has an existing insolvency process on the day the decision is made;
• if the employer affected by the crisis during the last six months prior to the declaration of an emergency accrued on average monthly taxes administered by the SRS in the amount of less than 200 euros;
• if the employer affected by the crisis did not submit a justification to the SRS about the employee’s downtime due to circumstances that the employer had under the crisis, or the SRS stated that the employee’s downtime was not related to circumstances that had arisen from the crisis;
• if the employee began labor relations after March 1, 2020;
• members of the board and council of the employer affected by the crisis;
• for those calendar days for which sickness benefit was provided;
• to employees who simultaneously work in a state or municipal institution or capital company, receive a pension or conduct business activities;
• workers who work in institutions funded from the state or municipal budget, and in enterprises controlled by them;
• the employer affected by the crisis, whose employees are leased to another taxpayer;
• if during the past three years, as a result of the audit, additional amounts have been revealed that the employer affected by the crisis must pay to the state budget in the amount of more than 3% of the employer’s tax revenues administered by the SRS for the corresponding year;
• if the employer or his board member affected by the crisis in the previous year and at the time of consideration of the application was fined for a violation relating to the tax obligations of the employer, customs violation, for violation of regulations governing labor relations, except when a separate violation is applied a warning or a fine not exceeding 151 euros, and during the year the total amount of fines does not exceed 500 euros.