Spain Coronavirus response and implications for business

By Borja Hermida, HLB Spain


To date, Spain counts nearly 50,000 cases of COVID-19 infections and after Italy, is the country most affected by the Coronavirus in Europe so far. The impact on society and the economy is great and the Spanish government is putting measures in place to support business owners. The main response of the Spanish Government has been Royal Decree Law 8/2020 (DRL 8/2020), that includes a number of extraordinary measures to address the economic and social impact of COVID-19 and provides an appropriate response to the situations arising as a result of the current crisis. This new piece of regulation follows Royal Decree 463/2020 declaring the state of emergency and the lockdown of the country as of 14 March 2020. The sate of alarm has limited the freedom of movement of people, establishing limits to commercial activity, restaurants leisure centers, ceremonies and religious sites.

Last Sunday March 22, the Spanish Prime Minister, has extended the estate of emergency until 11th of April 2020, and may be extended for a longer time in the future. The adopted measures are geared not only to combat the illness, but to strengthen protection for workers, families and vulnerable groups, while supporting the continuity of productive activity and the maintenance of jobs. All these measures will remain in force during the time the emergency status is in effect.

The measures adopted can be divided in three main categories: employment and social security measures; tax measures; economic measures.

Employement and social security measures

The measures set out to increase the flexibility of the temporary workforce adjustment plans, measures affecting social security contributions and measures related to unemployment protection will remain in force while the extraordinary situation arising from COVID-19 remains in place. In any event, these extraordinary measures relating to employment included in the Royal Decree-Law will be subject to the company’s commitment to maintain jobs for a period of six months from the date it resumes its activity.

Working remotely/from home

If the company continues its activity, it must provide the option of remotely working for its workers. This is not a legal obligation, but a recommendation. If the service provision continues remotely wages may not be reduced nor may workers’ rights be modified.

Rights to adapt the working day and reduce working hours

New provisions have been introduced by adapting the timetable at work and reducing the working hours for employees with duties to care for a spouse or partner and family members up to the second degree of kinship, in exceptional circumstances related to the activities needed to avoid the spread of COVID-19.

Suspension of labour activity

The company may request to suspend labour activity and stop paying its employees’ wages. Any suspension of the employment contract must be made through a temporary work adjustment plan (ERTE). An ERTE may be requested in the case of force majeure or when there are economic, technical or production reasons for it.

For these purposes, force majeure is considered to be loss of activity as a result of COVID-19, including the declaration of the state of alarm, which involve the suspension or cancellation of activities, the temporary closure of public premises, restrictions on public transport and, in general, on the movement of people and/or goods, lack of supplies that seriously impede continued ordinary business activities, or urgent and extraordinary situations due to the infection of the workforce or adoption of preventive isolation measures provided for by the health authorities, which must be duly accredited.

Generally, ERTEs are for suspension of employment contracts, but it is also possible to request an ERTE to reduce working hours between 10% and 70% of the working hours.

  • Right to receive unemployment payment: Workers affecting by a ERTE will receive unemployment benefit, even if they do not meet the minimum period of prior contributions required to make them eligible for the benefit. The amount of this benefit is 75% of the worker’s regulatory base amount.
  • Exemption employer´s social security contributions: Companies with less than 50 workers shall be exempted (75% exemption if it is more than 50 workers) from paying the employers’ social security contributions while the period of suspension remains in place.

Self-employment benefits

The self-employed people whose activities may be suspended as a result of COVID-19 or whose professional activity’s turnover is reduced by at least 75% with respect to the average turnover of the previous half-year:

  • right to receive the 70% of the minimum contribution base in the Special Self-Employed Social Security Scheme,
  • exemption of the social security contributions.

Tax measures

The following is a compilation of the provisional tax measures adopted. The different regional governments are also approving tax measures affecting its own taxes (mostly Basque Country region and Navarra region).

  • Suspension of tax judicial and administrative proceedings terms
  • Suspension of tax statute limitation period
  • Extension of certain tax deadlines
  • Deferral in the payment of taxes

The deferral is only available to individuals or entities with a volume of business not exceeding €6,010,121.04 in 2019. Subject to a request by the taxpayer, a deferral of payment will be granted in respect of tax debts arising from payment deadlines falling between 13 March 2020 and 30 May 2020, and would apply for value added tax (VAT), tax withholdings, excise taxes, and corporate income tax. A cap of €30,000 is set for tax debts that may be deferred on these special terms. The deferral will be granted for a fixed period of six months. No late-payment interest will accrue for the first three months. However, these deferrals will necessarily accrue interest for the remaining three months.

Economic measures

New line of guarantees for companies and self-employed

The Spanish Government will invest 100 billion euros in new lines of state guarantees for the renewal of loans and new financing that allows the management of invoices, cover liquidity needs and facilitate the maintenance of jobs. The ICO (Instituto de Crédito Oficial) is provided with an additional 10 billion euros to provide liquidity to companies through the ICO Funding Lines. In addition, in the case of exporting companies, also additional state guarantees have been approved.

Mortgage moratorium on vulnerable workers and self-employed

The moratorium will imply both the suspension of the mortgage payments and of the accrual of ordinary and default interest during the state of alarm.

The moratorium will apply only to mortgage loans granted for the acquisition of a regular housing and whose debtor is in a vulnerable situation as a consequence of the COVID-19 coronavirus crisis

Measures on public contracts

To avoid the negative effects on employment and business viability resulting from the suspension of public contracts, a specific regime for suspension of public contracts is provided for.

Support to SMEs for connectivity

Short and medium-term aid is articulated so that SMEs can equip themselves with telework solutions, and buy or access the leasing of equipment and services for digitalization.

Restriction on foreign investments

In response to the impact of COVID-19 in the markets and the Spanish Stock Market (IBEX 35) hitting its historic low, RDL 8/2020 had included a number of restrictions to the acquisition of certain assets and stakes in Spain.

In this regard, RDL 8/2020 declares a restriction of the investments made by investors outside the EU or the European Association of Free Commerce as well as those investments in strategic sectors when the investor, as a result of such transaction, holds 10% of the share capital or gains control over the governing body. For this kind of investments it will require a prior governmental authorization.

Other measures

  • Most of the corporate deadlines are suspended, including the one related to the filing of the annual accounts where not only has the deadline been suspended whilst the state of alarm remains in force, but the term extended three months since the state of alarm is finished. Similar measures have been approved for other filings such as the auditing report. In relation to the 2019 financial statements, the companies should indicate in the Explanatory Note that the COVID-19 could negatively affect the 2020 figures.
  • In light of the circumstances, RDL 8/2020 allows for companies to hold telematics meetings of the governing bodies (e.g. videoconference) even if the company bylaws do not provide for it.  
  • RDL 8/2020 has stated that whilst the state of alarm remains in force, directors of a company which is in insolvency situation are not under the duty to request the judicial insolvency declaration.

The situation Will continue to evolve in the weeks and months ahead. We are closely monitoring the latest developments. If you are a business operating in Spain and would like to discuss the implications for your operation in more detail, we welcome the opportunity to do so.

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