Public grants from authorities in the Balearic Islands

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The authorities in the Balearic Islands have published a COVID line of direct grants for the self-employed and businesses to mitigate 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 does the grant consist of?

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.

These finalist grants include the following line classifications:

Line 1: Grants for entrepreneurs or professionals applying the objective-estimate personal income tax system.
Line 2: Grants for entrepreneurs, professionals, companies or entities applying the direct-estimate personal income tax system to their net earnings, or who are liable for corporation tax or non-resident income tax for 2019.

What are the specifications in the Balearic Islands with respect to RD 5/2021?

The grants will be extended to (i) subsectors with a large downturn in business which, as it is difficult to include them as per the CNAE codes in RD 5/2021, necessitated special inclusion, (ii) strategic sectors in the economy of the Balearic Islands which must be protected, (iii) sectors making up the tourism value chain; and (iv) economic sectors subjected to decisions by the government of the Balearic Islands to reduce their activity in the months subsequent to June 2020 in order to control the spread of the pandemic.

The notice published also includes as beneficiaries of grants viable businesses which in 2019 produced negative net earnings due to the bankruptcy of Thomas Cook, and any businesses which made heavy investments in 2019 without which they would not have had negative net earnings.

Finally, in relation to the amount of the grant, unlike RD 5/2021, the maximum limit of the grant is extended to EUR 500,000 in the case of beneficiaries of Line 2.

What requirements must I satisfy?

Beneficiaries of the grants must meet the following requisites:

They must be registered for tax purposes in the Balearic Islands (with the exception of the scenarios stipulated in Article 2.B of the Official Gazette of the Balearic Islands of 29 May 2021 ).
They must have carried on an economic activity defined in Annex I of the Official Gazette of the Balearic Islands of 29 May 2021 (ver link) in 2019 and 2020.
They must still be carrying out the activity at the time of the application.
They must not have been convicted on a firm ruling barring them from obtaining subsidies or public grants or for offences relating to prevarication, bribery, misappropriation of public funds, influence peddling, fraud and illegal collection of funds or urban development offences.
They must not, for any proceedings in which they have been found guilty, have given rise to the definitive termination of any contract drawn up with the authorities.
They must be up to date with the payment of their obligations in relation to refunds of subsidies or public grants.
They must be up to date in terms of compliance with tax obligations with the state tax agency, with the autonomous community of the Balearic Islands and with social security.
They must not have requested voluntary bankruptcy proceedings, they must not have been declared insolvent in any proceedings, they must not be in bankruptcy, unless an agreement has been reached in such proceedings, they must not be subject to judicial proceedings or have been declared ineligible.
They must not have tax residence in a country or territory officially classified as a tax haven.
They must not have any kind of cover, through any kind of insurance policy or temporary assistance, for subsidisable expenses for the payment of which these grants are being requested.
They must not be affected by any of the bans applicable to beneficiaries of the grants stipulated in Article 13 of General Subsidies Law 38/2003 of 17 November.

In addition to these requisites, the beneficiaries of the grants must undertake the following obligations:

Comply with the obligations laid down in Article 14 of General Subsidies Law 38/2003.
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 the application of certain measures referred to in Royal Decree-Law 5/2021.
Keep their bank account unchanged, as stipulated in their application, up to the end of the first quarter of 2023, and this must be a financial institution on Spanish soil with an IBAN code beginning with ES.

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 will be equivalent to the total of any subsidisable expenses applied for on the form, in due consideration of the following thresholds, depending on the type of beneficiary:

For Line 1 beneficiaries the amount of the grant will be a maximum of EUR 3,000.
For Line 2 beneficiaries, as a general rule, the the maximum amount of the grant cannot be less than EUR 4,000 or more than EUR 500,000. In addition, the following specific thresholds are established:

In the case of entrepreneurs and professionals and permanent establishments and entities with a maximum of 10 employees, the maximum amount of the grant will be 100% of the downturn of the volume of business in 2020 with respect to 2019 which exceeds 30%.
In the case of entrepreneurs and professionals and permanent establishments and entities with more than 10 employees, the maximum amount of the grant will be 50% of the downturn of the volume of business in 2020 with respect to 2019 which exceeds 30%.
Fixed sum of EUR 4,000 in the following cases:

Applicants using the direct-estimate scheme to determine the result for the purposes of personal income tax, corporation tax or non-resident income tax, whose volume of operations did not fall by more than 30% in 2020 with respect to 2019 and who are also affected by certain circumstances defined in Article 6.4 of the Official Gazette of the Balearic Islands of 29 May 2021.
Applicants with a business downturn of more than 30% in 2020 with respect to 2019, when this percentage above 30% does not entitle them to at least EUR 4,000.

It should also be pointed out that, if when the credit has been assigned for Line 1 applicants and Line 2 beneficiaries, any undistributed credit remains, the credit will be shared out between the rest of the Line 2 beneficiaries on a pro rata system, with due observance of the various maximum limits previously stipulated.

What documentation will I be asked for in the application?

During proceedings for the application, the autonomous community's 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 or other authorities or public bodies to consult the tax data required for the scheme. .
En este caso, el solicitante no tendrá que aportar ningún documento adicional en esta fase.
If no authorisation is granted for cross-consultation of data by public authorities, the applicant must provide the following additional documentation:

For Line 1 beneficiaries:

Certificate from the AEAT tax agency attesting to the delegation or special delegation in which the tax address is located.
Certificate from the AEAT tax agency attesting to the sections of business activities tax and CNAE business activity codes considered equivalent used to classify the activity carried on by the applicant in 2019, 2020 and 2021.
Certificate of the census of entrepreneurs, professionals and withholders managed by the AEAT agency attesting that the applicant is still carrying out its activity at the time of the application and the date of registration in the census.
Certificate from the AEAT tax agency attesting to application of the objective-estimate personal income tax system in 2019 or 2020.

For Line 2 applicants:

Certificate from the AEAT tax agency² attesting to the delegation or special delegation in which the tax address is located.
Certificate from the AEAT tax agency attesting to the sections of business activities tax and CNAE business activity codes considered equivalent used to classify the activity carried on by the applicant in 2019, 2020 and 2021.
Certificate of the census of entrepreneurs, professionals and withholders managed by the AEAT agency attesting that the applicant is still carrying out its activity at the time of the application and the date of registration in the census.
Certificate from the AEAT tax agency attesting to the annual volume of operations declared or verified by the authorities for the purposes of value-added tax, and, where applicable, the general indirect Canary Islands tax in 2019 and 2020, whether this volume of operations fell by more than 30% in 2020 with respect to 2019, and the percentage fall.
Certificate from the AEAT tax agency in the event the scenario described in the preceding section does not apply, stating, in the case of those declaring personal income tax, the amount of the earnings declared in the self-assessments of payments by instalments for 2019 and 2020.
Certificate from the AEAT tax agency stating the tax base declared in the last instalment payment in the years 2019 and 2020 respectively, if these instalment payments are calculated in accordance with the provisions of 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 value-added tax or the general indirect tax, and did not apply the objective-estimate personal income tax system in 2019 or 2020.
Certificate from the AEAT tax agency stating the tax base declared in the last instalment payment in the years 2019 and 2020 respectively, if these instalment payments are calculated in accordance with the provisions of Article 40.2 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 value-added tax or the general indirect Canary Islands tax, according to the information furnished to the tax agency by the autonomous community of the Canary Islands, and did not apply the objective-estimate personal income tax system in 2019 or 2020.
Certificate from the AEAT tax agency stating the 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.
Certificate from the AEAT tax agency stating that no negative net result appeared in the 2019 personal income tax return.
Certificate from the AEAT tax agency attesting whether the applicant is registered in the census of entrepreneurs, professionals and withholders and, if registration or deregistration occurred in 2019 or 2020, information on the dates of registration and deregistration in this census, and reason for deregistration.
Certificate from the AEAT tax agency attesting to a downturn in business 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.
Certificate from the AEAT tax agency stating the applicant is up to date with tax obligations.
Certificate from the tax agency in the Balearic Islands stating that the applicant is up to date with tax obligations in the autonomous community of the Balearic Islands.
Certificate from the General Treasury of the Social Security stating that the applicant is up to date with their obligations.
In the case of groups, the parent will have to provide the documentation stipulated in sections iv., v. and vii. above, and the list of companies which formed part of the group in 2019, 2020 and 2021, which must state the tax number, business address and whether or not they pay tax to a special-territory tax authority.

When the application has been submitted, the tax agency in the Balearic Islands will check, for each application, compliance with all the requisites to be a beneficiary in accordance with the information and the data supplied or certified by the state tax agency or by any furnished by the party concerned.

It should also be pointed out that any applications for subsidies submitted in reference to Line 1 will be processed in the order of arrival in terms of days and times of day when the period for submission of applications has expired (28 June 2021).

In the case of Line 2, the period for submission of applications must also have expired, but in this case all the applications submitted which meet the requisites will receive grants in accordance with the criteria stipulated in Article 6. 3. of the Official Gazette of the Balearic Islands of 29 May 2021.

How is my grant justified when it is approved?

Presentations of justification for grants will be in electronic format via the portal of the tax agency of the Balearic Islands, and presentations may be made as of the day following the date of payment up to 31 March 2022, attaching the following documents:

Justification of expenses applicable for subsidies approved in the amount of EUR 6,000 or less:

Responsible declaration by the beneficiary or beneficiary company as per the specimen attached in Annex III of the Official Gazette.
Letter of payment of a refund in the event of any remainders not applied, and the interest they carry, if any.

Justification of the expenses applicable for subsidies approved in an amount greater than EUR 6,000 and less than EUR 60,000:

Classified list of expenses met with the amount of the grant approved, as per the specimen attached in Annex IV of the Official Gazette.

Where applicable, letter of payment of a refund in the event of any remainders not applied, and any interest they carry.

Justification of expenses applicable for subsidies approved in the amount of EUR 60,000 or more:

Report by an auditor, demonstrably accrediting the usage made of the grant to pay the subsidisable outlays established in this order, and with respect to the order of priority of payment established in same.

What is the deadline, and how can I apply for the grant?

Applications may be submitted between 14 June and 12 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 tax agency.

The applicant must go to the form for requesting the grant, known as "Línea Covid de ayudas directas a autónomos y empresas (financiada por el gobierno de España)" posted electronically by the tax agency of the Balearic Islands.

For more information on the public grants scheme, go to the Official Gazette of the Balearic Islands for details of the notice posted.

ANNEX. CNAE ACTIVITY CODES OF ADDITIONAL SECTORS ELIGIBLE FOR GRANTS, AS APPROVED BY THE COMMITTEE ON THE AGREEMENT FOR THE REACTIVATION AND ECONOMIC TRANSFORMATION OF THE BALEARIC ISLANDS

CNAE-2009	DESCRIPTION ACTIVITY
1011	Meat processing and conservation.
1013	Preparation of meat and poultry products.
1043	Production of olive oil.
1053	Production of cheese.
1054	Preparation of milk and other dairy products
1102	Winemaking.
1104	Production of other non-distilled beverages.
1105	Production of beer.
1107	Production of non-alcoholic beverages.
1512	Production of leatherwork items, travel.
1520	Production of footwear.
1622	Production of integrated wooden flooring.
1623	Production of other wooden structures and joinery sections and fine woodworking for construction.
1629	Production of other wood products; rubber items, for basketmaking and espartograss products.
2041	Production of soaps, detergents and other cleaning and polishing products.
2042	Production of perfumes and cosmetics.
2059	Manufacture of other chemicals not included elsewhere
2219	Manufacture of other rubber products
2222	Manufacture of plastic packaging and containers
2229	Manufacture of other plastic products
2561	Treatment and cladding of metals
2594	Manufacture of bolt products
3101	Manufacture of office furniture.
3102	Manufacture of kitchen furniture.
3109	Manufacture of other furniture.
4631	Wholesale trading in fruit and vegetables.
4632	Wholesale trading in meat and meat products.
4633	Wholesale trading in dairy produce, eggs, oils and edible fats.
4635	Wholesale trading in tobacco products.
4645	Wholesale trading in perfumes and cosmetics.
4675	Wholesale trading in chemicals.
4752	Retail trading in hardware, paint and glass (souvenirs)
4761	Retail trading in books in specialist establishments
5811	Book publishing.
6010	Broadcasting activities
6201	Computer programming activities.
6202	Computer consultancy activities.
6203	IT resources management.
6209	Other services relating to information technology and computers.
6311	Processing of data, hosting and related activities.
6312	Web portals.
6391	News agency activities.
6399	Other information services not included elsewhere
7312	Communication media representation services
8510	Primary education ("escoletas")
8551	Sport and recreational education
8552	Cultural education
8553	Driving and racing driver school activity
8559	Higher education not included elsewhere. Academies, training centres and non-regulated private teaching centres.

1. This requisite exempts groups of companies, or 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, or non-financial non-resident entities operating in the Balearic Islands through a permanent establishment.
2. State Tax Agency.

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