What is going to happen with the business – especially the micro, small and medium-sized companies in Bulgaria, is the second most burning question everyone’s asking after how many Coronavirus cases are registered in the country. There are a number of measures related to the financial survival of businesses that are currently discussed by the government, the Confederation of Employers and Industrialists in Bulgaria (KRIB), and the Bulgarian Startup Association (BESCO). Most of the ideas are currently being discussed, but have not entered into force.
On Governmental level
The Bulgarian government is proposing two measures to help businesses that face financial difficulties due to the coronavirus outbreak: one is focused on supporting employment, the other to create buffers for firms that may turn unable to pay their loans.
“To implement the measure for employment support, we will propose an amendment to the Social Security Code (SSC) and create a mechanism whereby legal entities that have to choose between laying off certain employees or keeping them employed for another three months, as the measure is for three months, can benefit from government support of 60% of the salaries paid to employees so far,” said the minister of finance, Vladislav Goranov.
It is unclear how much money will be needed for this measure as no limits have been set to date. The 60% will be calculated on the basis of the social security income for employees as per January 2020. It is also not clear who and under what conditions can apply for assistance, or when it will be granted. The measure will most probably be added to the State of Emergency Act, between its first and second reading this week. According to the information provided so far, businesses should be able to apply through the National Employment Agency and provide details on the number and specific data of the employees for whom support will be requested. After receiving the financial support, companies will have to complement it to 100% and maintain commitment not to terminate employee contracts.
Another announced measure involves an increase of the capital of the Bulgarian Development Bank (BDB) with BGN 500 million (about €256 M). These resources will serve two purposes – the first being the issuance of portfolio guarantees to commercial banks, from which companies have taken out loans as this should allow banks to be more flexible to clients experiencing financial difficulties. The second option relates to BDB temporarily acquiring stakes in affected businesses with a repurchase option. The mechanism would include a buy-back at the same price clause with no right of dividend for the bank.
“This secures free financing for companies because interest on capital is zero,” says Goranov. There are no details for this measure either as the criteria for companies are currently being worked out.
Last Friday, the German government also stated that financing will be available to struggling companies through the national development bank KfW, without an upper limit to the total aid, and even nationalization of businesses is being considered as an option.
The Finance Minister also announced a proposal for the deadline for the Financial Year End and filing of annual financial statements and declarations under the Corporate Income Tax Act to be moved from March 31th to June 30th.
What the employer and startup communities think
The Confederation of Employers and industrialists in Bulgaria (KRIB) came up with an extensive list of suggestions for the government – some of the most significantly related to the financial survival of businesses are:
- Delaying the deadlines for payment of social security contributions for February
- No interest on public liabilities for periods extended in the context of the situation
- Extension of the deadlines for filing and paying the annual taxes of individuals by 60 days
- Postponement of the deadline for payment of the annual profit taxes for firms and individuals by 30 or 60 days
- Temporary (3 months) suspension of the collection of advance profit taxes for 2020
- Companies with good economic performance and good credit history that can prove liquidity problems as a result of the crisis to be entitled to rescheduling of credit contributions to financial institutions (banks, leasing companies, etc.), respectively, to receive state guarantees to increase its credit framework with financial institutions
- Freezing the payment of social security contributions for at least the period of crisis restriction
- Lending under favorable terms to the affected businesses by the Bulgarian Development Bank
- Enablement of the business to pay corporate tax and/ or dividend tax with compensation instruments.
The Bulgarian Startup Association BESCO is currently running a poll on Facebook asking the startup community what in their opinion are the measures the Bulgarian government should take to help businesses survive and get through the crisis. So far, the most popular suggestions seem to be in line with the measures proposed by KRIB and the government – postponement of social security and VAT payments as well as an extension of the deadline for annual financial reports to June 30th instead of March 31st.
Thibaut Taittinger, a founder of Puzl Coworking and part of the BESCO community, has shared three suggestions for urgent actions to be taken by the government: “ First, companies should be asked to put people in unpaid leave instead of firing them. The government should pay 100% of salaries up to 800 leva, then 70% of salaries from 800 to 2000 leva, and maybe 20% for those up to 4,000 leva. Secondly, all companies that keep their employees at work to be entitled not to pay social security contributions until the crisis is over (or at least get reduction). And third, companies should get procedures to request a delay of VAT payments .”
EU level measures
In the meantime, the European Investment Bank (EIB) is planning a financial package of measures to mobilize up to €40 billion for small and medium-sized companies in the Member States affected by the spread of coronavirus. The toolkit consists of guarantee schemes and liquidity for banks and buyback programs for social securities.