The Community of Madrid has published a Covid line of direct aid to self-employed and companies to alleviate the effects of COVID. This public grants scheme forms part of Royal Decree 5/21, which sets out to provide companies and the self-employed with EUR 7,000 million in public grants.
What are the grants?
The grant consists of a sum of money which must be exclusively used to pay off debt and make payments to suppliers and other creditors, financial or non-financial, and the fixed costs incurred by the party applying for the grant, provided the payments accrued between 1 March 2020 and 31 May 2021, in relation to contracts prior to 13 March 2021.
Which new sectors does the Community of Madrid include with respect to the RD?
The grants will also extend to the secondary sector thanks to an extension of activities that will be eligible for them, a total of 176 economic activities, an extension of 81 with respect to the 95 originally stipulated in Royal Decree 5/21. The new sectors include activities relating to retail, the services sector (i.e. hairdressing salons), and cultural, recreational and educational sectors.
What requirements must I satisfy?
Beneficiaries of the grants must meet the following requisites:
- They must be registered for tax purposes in the Community of Madrid (with the exception of the scenarios stipulated in Article 6.2 of the Government Council Agreement of 28 April 2021)1.
- They must carry on an economic activity defined in Annex V of the Government Council Agreement of 28 April 2021 (see link).
- They must be in one of the following situations:
- Downturn of more than 30% in their annual volume of business declared or verified by the authorities, in VAT or equivalent indirect tax in 2020, with respect to 2019.
- They must apply the objective-estimate system for personal income tax (IRPF).
- They must be consolidated groups paying corporation tax through the consolidated taxation system.
In addition to these requisites, beneficiaries of the grants must undertake the following commitments:
- Continue the activity corresponding to the grants up to 30 June 2022.
- Refrain from distributing dividends in 2021 and 2022.
- Refrain from approving any increases in the remuneration of senior management over a period of two years following approval of the grant.
Nor will the authorities consider as beneficiaries any entrepreneurs or professionals, consolidated entities and groups which, in their direct estimate of personal income tax, corporation tax or non-resident income tax for 2019, declared a negative net result.
How much is the grant?
The amount of the grant is determined by the type of beneficiary:
- In the case of entrepreneurs or professionals applying the objective estimate for personal income tax, the maximum grant will be EUR 3,000.
- In the case of entrepreneurs and professionals whose annual volume of business declared or verified by the authorities, for VAT or equivalent indirect tax, fell by more than 30% in 2020 with respect to 2019, the maximum grant will be:
- 40% of the downturn of the volume of business in 2020 with respect to 2019 which exceeds the 30%, in the case of entrepreneurs and professionals applying the personal income tax direct-estimate system, and permanent establishments and entities with a maximum of 10 employees.
- 20% of the downturn of the volume of business in 2020 with respect to 2019 which exceeds the 30%, in the case of entities and entrepreneurs or professionals and permanent establishments with more than 10 employees.
What documentation will I be asked for in the application?
During proceedings for the application, the authorities will demand presentation, along with the form, of documents to substantiate the statements of the applicant. Two procedures have been set up to gather the information:
- The issuance of authorisation to the tax authority and social security authorities to consult the tax data required for the scheme.
In this case, the applicant will not be obliged to provide any further documentation during this phase.
- If no authorisation is granted to the tax authority and the social security authorities to consult this information, the applicant must provide the following additional documentation:
- Form 303 for 2019 and 2020.
- Form 111 for 2020.
- Form 200 for 2019.
- AEAT certificates attesting to:
- Delegation or special delegation in which the tax address is located.
- The sections of business activities tax (IAE) and codes of national business activity classification (CNAE -09-) considered equivalent used to classify the activity carried on by the applicant in 2019, 2020 and 2021.
- Volume of business declared or verified by the authorities concerning VAT.
- All taxable eligible income from their economic activity reported in their 2019 tax declaration, and the sum of all taxable eligible income from their economic activity reported in their self-assessments of payments by instalments for 2020, for personal income taxpayers, when the applicant for the grant is tax-resident in the Cities of Ceuta or Melilla or exclusively carries out operations with no obligation to submit a periodic self-assessment of VAT or general Canary Island indirect tax, according to the information already furnished to the tax agency for the Autonomous Community of the Canary Islands, and did not apply the objective-estimate personal income tax system in 2019 or 2020.
- The tax base declared in the last instalment payment in the years 2019 and 2020 respectively, if the instalments are calculated in accordance with Article 40.3 of Corporation Tax 27/2014 of 27 November, for taxpayers liable for corporation tax or non-resident income tax with a permanent establishment, when the applicant for the grant is tax-resident in the Cities of Ceuta or Melilla or exclusively carries out operations with no obligation to submit a periodic self-assessment of VAT or general Canary Island indirect tax, according to the information already furnished to the tax agency for the Autonomous Community of the Canary Islands, and did not apply the objective-estimate personal income tax system in 2019 or 2020.
- Number of employees, taking account of the average number in 2020 of those receiving economic gain from work as stipulated in the monthly or quarterly declarations of withholdings and prepayments.
- Application to the objective-estimate personal income tax system in 2019 or 2020.
- They must not have declared negative net earnings in their personal income tax statement in 2019 for any economic activities for which they applied the direct-estimate method for the purposes of determination or, where applicable, when the tax basis for corporation tax or non-resident income tax was negative, prior to application of the reserve for capitalisation and compensation of negative tax bases.
- If the applicant is registered in the census of entrepreneurs, professionals or withholders and, if registration or deregistration occurred in 2019 or 2020, information on the dates of registration and deregistration in the census, and reason for deregistration.
- The downturn in business in the territory, focusing on the weight of remuneration for personal work by their employees in the territory, in relation to any groups and entrepreneurs, professionals or entities whose volume of business in 2020 exceeded EUR 10 million, carrying on their economic activity in more than one autonomous territory or in more than one autonomous city.
When compliance with the requisites established has been verified and approval of the grant is forthcoming, it will be paid to the beneficiary through the account number and IBAN code stated on the application.
The subsidy will be furnished in a single payment, in advance, exempting the beneficiary from the obligation to furnish any guarantees or collateral, as per the provisions of Article 10 of the Community of Madrid's Law 2/1995 of 8 March.
The beneficiary must apply the amount of the grants for the purposes of paying subsidisable costs within two months of reception of the grant.
How is my grant justified when it is approved?
When the grant has been approved, the authorities will demand the following documentation to justify the direct grants and ensure that the commitments undertaken by the applicants have been fulfilled:
- Justification of grants approved under EUR 60,000:
- A justificatory report of compliance with the conditions imposed.
- A classified list of the activity's outlays and investments, with identification of the creditor and of the invoice, date of issue and, where applicable, date of payment, and proof of payment.
- Breakdown of any other income or subsidies that have financed the activity subsidised, with an indication of the amount and origin.
- AEAT certificate attesting to non-approval of any increases in the remuneration of senior management over a period of two years following approval of the grant, non-distribution of dividends in 2021 or in 2022, and continuation of the economic activity up to 30 June 20222.
- Where applicable, letter of payment of a refund in the event of any remainders not applied, and the interest they carry.
- Justification of grants approved in excess of EUR 60,000:
- Invoices issued by suppliers and other creditors, paid by the beneficiary against the subsidy approved.
- Banking evidence of payment of invoices. When the creditors are financial institutions, certificate from the financial institution attesting to total or partial cancellation of the debt.
- When invoices and payment obligations are subsequent to 13 March 2021, contract or contracts from which payment obligations to suppliers and other creditors arise or, if there is no written contract, order or acceptance of the offer or the estimate, with attestation in any case of the date on which the debt or payment obligation is undertaken.
- Certificate attesting to the non-approval of any increases in the remuneration of senior management over a period of two years following approval of the grant.
- In scenarios in which telematic data-crossing has been authorised with the AEAT agency, the Community of Madrid will verify that the beneficiary did not distribute dividends in 2021 or 2022, and that they continued their economic activity up to 30 June 2022. If no data-crossing authorisation is forthcoming, the following must be furnished:
- AEAT certificate attesting to the distribution of dividends by the applicant in 2021 or 2022.
- AEAT certificate attesting to continuation of economic activity by the applicant up to 30 June 2022.
What is the deadline, and how can I apply for the grant?
Applications may be submitted between 1 May and 31 July 2021, both inclusive.
Applications, along with the documentation required, may be submitted in telematic format only by means of the electronic ID or one of the electronic certificates recognised by the Community of Madrid.
Applicants must go to the "Management" section (“Gestión") on the Madrid Community's website where the scheme is posted, where they will find the application process and the "forms" they must fill in to submit to the electronic register.
For more information on the public grants scheme, go to the Madrid Community's website for details of the scheme.