Spain approves relief package for struggling hospitality businesses

The measures aim to increase liquidity and delay payments in a sector hit hard by the coronavirus crisis

Spanish bars and restaurants have suffered particularly hard from the economic fallout of the coronavirus pandemic.
Spanish bars and restaurants have suffered particularly hard from the economic fallout of the coronavirus pandemic.Jorge Peteiro (Europa Press)

The Spanish government on Tuesday approved a relief package for retailers and businesses in the tourism, food and drink sectors, which have suffered significantly from the restrictions to curb the coronavirus pandemic.

The measures in the Plan de Refuerzo do not include direct aid. Instead, they aim to help small retailers and hospitality entrepreneurs increase their liquidity by incentivizing rent reductions, offering tax deferrals, improving access to financing and delaying Social Security contributions.

The overarching goal is to reduce companies’ fixed costs and adapt them to the new reality faced by hundreds of thousands of businesses affected by the crisis. The impact of the new plan is estimated at €4.2 billion, according to government spokesperson María Jesús Montero.

The industry’s main associations had been requesting direct aid. “Funding lines alone will not be enough because businesses are already heavily in debt,” said José Luis Yzuel, the president of the Spanish hospitality association CEHE, in statements made in mid-November when the government was still reviewing the plan.

According to this group, the industry will lose half of its annual €123 billion earnings in 2020, and one-third of the 300,000 businesses that were open before the pandemic will be closed by the end of the year. Some €11 billion is at stake just over the Christmas period.

These are some of the new measures; the full list is available here.

What kind of relief is available?

The government has created several categories of measures: incentives for rent reduction (with an estimated impact of €324 million), increased access to government-backed loans (€520 million), tax-related measures (€2.8 billion), and labor issues such as Social Security contributions (€567 million).

Who can apply for reduced rent?

Small and medium enterprises (SMEs) as well as self-employed entrepreneurs who are renting from either a large landlord (those with more than 10 properties) or from a small individual landlord.

In the first case, if parties fail to reach an agreement to reduce or cancel payments due to the pandemic, tenants may request a 50% rent reduction for the duration of the state of alarm (which is due to end on May 9, although it could be extended), or else a moratorium for the same period and up to four additional months after that. In this case, delayed payments may be made over a two-year period starting from the end of the moratorium. The Spanish executive estimates that these measures will have an impact on around 190,000 establishments.

Small individual landlords who accept a rent reduction for their tenants during the months of January, February and March 2021 may deduct the amount of the reduction (up to 100% of the rent amount, if it is canceled entirely) from their tax filings.

Changes to ICO credit lines

There will be more time to repay loans backed by the state-owned Official Credit Institute (ICO). For retailers, restaurateurs and tourism entrepreneurs, the payment-free period has been extended from one to two years, while repayment may take place over eight years, up from five. The ICO has also announced a new series of guarantees providing 90% state backing to €500 million worth of loans to small businesses in the hospitality sector. Travel agencies and tour operators may also benefit from ICO-backed funding to refund customers affected by pandemic restrictions.

Deferred tax payments

Around 617,000 taxpayers will be able to defer tax payments for up to six months, with three months of that interest-free, on payments with a due date between April 1 and April 30, 2021, up to a top amount of €30,000. This would allow struggling businesses to pay in October. There are other reductions available for income tax (IRPF) and value-added tax (IVA).

Social Security contributions

Contributions owed by companies between December 2020 and February 2021 may be deferred, while the self-employed may defer payments due between January and March 2021. Deferred payments will be charged 0.5 % interest.

English version by Susana Urra.

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