e-⁠residency update #5 on the coronavirus (covid-19) pandemic

Estonian Government announces latest emergency economic measures for small business and tourism sector. Applications now closed.

On 19 March, the Government of Estonia announced a €2 billion emergency economic relief package in response to the pandemic. The aim of the measures is to mitigate the most difficult initial stage of the resulting economic crisis in order to support and protect Estonian working people and businesses.

We reported on the first set of measures on the blog in March:

The objective of this article is to detail the latest measures the Government has put in place for business. There are two new announced measures relevant for e-⁠residents:

1. €10 million in total for micro and small businesses and self-employed people (FIE)
2. €25 million in total for the tourism sector

The goals of these measures are to partially compensate micro and small businesses, self-employed people, and tourism sector businesses for damage suffered as a result of the pandemic, and to help in sustaining their business for the future post-crisis period.

Eligible entrepreneurs with Estonian companies will be able to apply from 9am on 11 May 2020 (EE time), including e-⁠residents that meet the relevant requirements. NB: Enterprise Estonia (EAS) has stopped accepting applications for compensation for small businesses since 1 June and will stop accepting applications for crisis support for tourism companies on 5 June at 16.00.

The crisis measure package totalling €35 million is being managed and distributed by the Ministry of Economic Affairs and Communications and Enterprise Estonia (EAS). The target group of companies eligible to apply for the support is large and the volume of the support budget is limited, thus, the support will be processed in the order the applications are received until the funds run out.

For this article, I have mostly focused on the first measure for small businesses as this is the most relevant for our community. I have briefly described the tourism relief measures and provided links to more information for those few e-⁠residents who might be eligible.

The Estonian Government has allocated €10 million in total to support micro and small businesses and self-employed persons who have been negatively affected by the COVID-19 pandemic. The purpose of the grant is to support the sustainability of their products and services post-crisis.

Eligible small businesses and entrepreneurs can apply for a one-off grant of state aid of either €3000 or €5000 for partial compensation of losses resulting from the pandemic. This amount will not need to be paid back.

The amount of support depends on the size of the company’s turnover and the loss of turnover during the crisis compared to the same period last year:

1. €3,000 per company whose turnover in the financial year 2019 was more than €20,000 and less than €40,000
2. €3,000 per company that has been operating for less than a year, whose turnover in the operating period was more than €20,000 and less than €40,000
3. €5,000 per company whose turnover in financial year 2019 was greater than or equal to €40,000 and less than €100,000 and whose turnover in March or April 2020 decreased by at least 30 percent compared to the turnover in the same month in 2019
4. if the company referred to in the previous point has been operating for less than a year, its turnover in March or April 2020 must be at least 30 per cent less than average turnover in a calendar month based on the data of the Estonian Tax and Customs Board

Note that the calculation of the decrease in turnover for 2020 is based on data from the last VAT declaration submitted by the business on time to the Tax and Customs Board.

In addition to the turnover parameters specified above, there are several eligibility requirements, including:

• the applicant’s economic activity has been adversely affected by exceptional circumstances due to the COVID-19 outbreak
• The applicant has at least 1 and no more than 49 employees with a valid contract (based on the registry of employment)
• as at the beginning of the emergency situation (12 March 2020), the applicant has no tax debts
• as at the time of applying for support, the applicant has submitted all due tax returns and annual reports
• as at 31 December 2019, the applicant was not in financial difficulty or the subject of any compulsory winding-up, liquidation or bankruptcy proceedings
• where the applicant previously received a grant of from the government which is due for repayment, the repayments must have been made in the amount claimed by the time the application is submitted, before the due date for payment has expired
• the applicant’s main activity is not excluded (agriculture, forestry, fishing and seafood processing, accommodation and food service activities, activities of travel agencies and tour operators, reservation and related activities)
• the applicant has not received support under the Regulation of the Minister of Foreign Trade and Information Technology “Support for Compensation for Damage in the Tourism Sector Negatively Affected by the COVID-19 Virus Outbreak” (see below)

In addition, support under this specific measure cannot be applied for more than once by a registered company or self-employed person. An applicant also cannot receive more than €800,000 state aid in total under the COVID-19 emergency measures.

Applications will open at 9am on 11 May 2020 (EE time).

Grants will continue to be allocated until the budget of €10 million is exhausted. Applications will be assessed in conformity with the eligibility conditions. NB: Enterprise Estonia (EAS) has stopped accepting applications for compensation for small businesses since 1 June and will stop accepting applications for crisis support for tourism companies on 5 June at 16.00.

Documents
required for application:

• application form
• for companies, the balance sheet and income statement as at 31 December 2019, or in the case of a small enterprise operating for less than a year, the income statement and balance sheet as at 29 February 2020
• an applicant’s balance/turnover reports from March/April 2019 and March/April 2020 in order to prove the decreased turnover (in case the applicant’s turnover is not taxed by VAT)
• for self-employed persons (FIE), the 2019 income tax return

The Estonian Government has also allocated 25 million euros to support the tourism sector, aimed at tourism companies (accommodation, catering, travel companies, and tourist attractions) and tourism service providers. The aim is to support struggling tourism businesses to cope with the crisis, survive the crisis, and emerge faster as soon as demand recovers.

The amount of support per company ranges from 2,000 to 60,000 euros, depending on the company’s field of activity, size, loss of turnover and labour taxes paid to the state. The grant is up to 100% of the employment taxes the company paid in 2019, but not more than €60,000. The grant will not need to be paid back.

The requirements and application process vary depending on the type of tourism company or service provider. If the company belongs to more than one of the service groups, the company must choose which aid best helps the company, as the aid is one-off per company.

NB: Enterprise Estonia (EAS) has stopped accepting applications for compensation for small businesses since 1 June and will stop accepting applications for crisis support for tourism companies on 5 June at 16.00.

As reported earlier this week, we know from our recent community survey that e-⁠residents have been greatly impacted by the COVID-19 crisis. But it was also comforting to see that for some, it’s business as usual, and for others, the crisis has been a catalyst to adapt in different ways, from the covid pivot to helping those in need.

You may have seen in our newsletter or on our social media that we are hosting a number of e-⁠Residency webinars on various topics to support you through the crisis. Coming up in the next weeks, join us and learn how e-⁠Residency can help entrepreneurs in Spain, Russia, Japan and German-speaking countries.

Register on our Events Calendar and join us and our expert guests on Zoom or Facebook!