BGI Russia - Government Measures to Support Business in Russia Amid the COVID-19 Pandemic

A high alert regime has now been introduced in the territory of all entities of the Russian Federation, which means a halt to the activities of most companies that are not directly related to the life support of settlements of various entities. Due to the fact that the spread of the COVID-19 infection has a significant impact on small and medium-sized businesses, the federal authorities have taken a number of measures to support entrepreneurship during the period of self-isolation.

1.          Contractual obligations

Force majeure:

Certain bodies and public institutions (for example, the Federal Antimonopoly Service, the Bank of Russia) have recognised that the current situation meets the criteria of “force majeure” circumstances and take this into account when working with suppliers, as well as when considering complaints under state contracts. The Chamber of Commerce and Industry of Russia, in turn, provides free services to issue an evidence of force majeure circumstances to defer the performance of obligations under contracts and to exclude possible penalties.

Rental payment:

Landlords of non-residential premises are required to provide a deferment in rental payment. The right to deferment can only be claimed by tenants operating in the most COVID-19 affected economic sectors, among which are, for example, transportation services (air and auto transport), hotel business, catering and fitness activities. A deferment must be granted for the period from the moment of introduction of the high alert regime or state of emergency in the relevant entity of the Russian Federation until October 1, 2020 under the following conditions:

·      full exemption from rental payment for the duration of the high alert regime or state of emergency;

·      an exemption in the amount of 50% of the rent from the date of cancellation of the introduced regime.

Tenants also have the right to demand a reduction in rental payment for the corresponding period.

Entrepreneurs are invited to pay off all arrears of rental payments until 2023.

2.          Taxation

In order to reduce the tax burden on small and medium-sized businesses, the following privileges have been introduced:

·      Extension of the terms of advance payments/ payments for transport tax, property tax of organisations, corporate tax, personal income tax paid by sole proprietors, and land tax.

·      Provision of a delay in filing tax reports until May 2020.

·      Establishment of a reduced rate for the payment of insurance contributions in the amount of 15%.

A moratorium on all planned and unscheduled tax audits has also been introduced until the end of 2020.

3.          Additional support measures:

Credit projects

To ensure payment of salaries to employees, the Bank of Russia has funded some large banks, such as Sberbank and VTB, so that they could provide interest-free loans to small businesses. The calculation of the loan amount will be based on the number of employees.

In addition, all entrepreneurs can apply for a non-targeted loan at a rate of 8.5% per annum for up to 3 years under a special programme developed by the Bank of Russia to support small businesses.

Bankruptcy moratorium

A moratorium on initiating bankruptcy proceedings has been introduced for the period from April 3 to October 3, 2020. The moratorium applies to organisations and sole proprietors operating in the areas most affected by the pandemic. The courts have stopped accepting bankruptcy petitions from creditors of such enterprises, and have also suspended the examination of petitions on cases in which the bankruptcy procedure has not been initiated.

Utility services

Besides, small and medium-sized businesses operating in the most affected sectors have the right to temporarily not pay fines and penalties for late payments for utility services, with the accrual of these penalties having also been temporarily suspended.

State subsidy

By May 18, it is planned to provide non-repayable funds for the payment of salaries to employees of small and medium-sized businesses that are most affected by the pandemic. These are, for instance, organisations operating in the field of air transportation, hotel business, tourism, etc. The amount of payments will amount to minimum wage per employee. At the same time, only those enterprises that have reduced no more than 10% of the staff can apply for state aid.

Moreover, additional programmes for the allocation of funds from the federal budget will be created to finance certain particularly affected sectors. In such manner, funds have already been allocated to reimburse costs to air companies that carried out emergency evacuation of Russian citizens from abroad. It is also planned to provide additional funds to cover current operating expenses of air companies.

As the pandemic in the country is becoming increasingly protracted, the state is endeavouring to respond in a timely manner and develop additional support measures, which we will inform about.