“When you feel like giving up, remember why you held on for so long in the first place.” - Unknown
There is no doubt the international community on Mallorca has proven to be an entrepreneurial lot. You are active in making the island life dream come true for you, your family, clients and often employees. Extra kudos are in order for tackling a new market in another language and offering what you do best to the local community and tourists.
Starting, owning and operating a small business in Mallorca includes bureaucratic paperwork and the usual costs of telephone, petrol, taxes, social security and accounting. Throw rent into the mix of expenses and you MUST make sure your business plan is solid. Unfortunately, all businesses are in danger during this uncertain time - especially if the accounting books didn´t have emergency savings set aside. Nevertheless, the most vulnerable during the COVID-19 crisis are the small businesses and self-employed “aútonomos”.
Governments Step in To Support the Self Employed #
The Balearic Government has announced that they will inject 50M euros to give much needed cash relief to the self-employed and small/medium companies. In addition, to alleviate personal debt, there is a moratorium on mortgages. Also, 6-year micro credits are being made available to renters unable to pay rent.
The Spanish government approved measures to postpone (or at least fragment) certain payments including income IRPF, VAT and Corporate taxes (“impuesto de sociedades”). These were previously sacred and off-limits to any type of negotiation, but concessions have been made due to COVID-19 for companies invoicing less than 6M.
Most importantly, the self-employed have been granted an emergency financial aid benefit if their billing falls 75%. (It is important to note that it is your invoicing that must fall, not that your clients have stopped paying you and your income falls 75% as a result. This is an accounts receivable issue and a separate topic).
You Paid into The System … #
Let´s start with the basics. Who can take advantage of the COVID-19 special government aid? All “autónomos” are eligible whether you are an individual, or a self-employed business (with or without employees) that has been active in the last 6 months. You must be properly registered and up-to-date with paying into the social security, taxes and VAT.
Did your business stop functioning on March 14th due to the COVID-19 state of alarm? This automatically gives you aid for 1 month until April 13th… IF you have been up-to-date with all your government financial obligations thus far. If this is not the case, you may still be eligible, but you need to consult your accountant and you may be offered 30 days to put your payments in order. If the state of alarm is prolonged, aid will also be extended until the last day of the month in which the state of alarm is lifted.
Perhaps you continue to be able to work, but still need help? If you can prove your billing has fallen by 75% compared to the average billing for the previous semester, aid is available to you. If you have not been actively paying into the system for a full six months, there still may be some financial help for you too, but it will be less. To prove your billing has fallen you can ask your clients for a simple email saying that they are cutting back on your services due to COVID-19. You do not need to produce in-depth documentation or go overboard with compiling detailed material, but the authorities will need proof of the effect COVID-19 has on your income.
You should not terminate your registration (“darse de baja”) with Hacienda or Social Security, as this will automatically exclude you from the benefit aid.
… And This Is What You Get #
In general terms an autónomo, in March will get about 352€ because the crisis started in mid-month; for April about 661€. Clearly, this is meager and one more reason to become a member of organizations like PIMEM that vouch for small to medium size businesses in the Balearics.
How to Process Your Application #
You should start with your Mutua. If you are not sure which one offers your contingencies coverage (mandatory for all self-employed after 2007), refer to your paperwork when you registered as an autónomo.
Social Security Payments #
Meanwhile, there was much ire regarding the March 13th automatic deductions of the social security payment from the company bank accounts and the government insisted it had to be paid regardless because they could not implement a stop quick enough.
On April 1st, the government finally got into gear and came up with some relief.
By an April 10th deadline, the self-employed can apply for a 0,5% interest loan to pay the April social security payment. Then, for May, June and July´s payment, a 6-month moratorium kicks in without interest or surcharges. This is available as long as you do not already have a payment plan with them already in place from the past.
If you are a small business with employees, you can either temporarily suspend their contract or offer a temporary reduction of time/salary (ERTE). Your gestor can help you understand which regime best suits and it is important that you and the employee understand that this is not a firing, but rather a temporary measure in which the employers has an obligation to keep the employee under contract for 6 months following the state of alarm.
With regard to the social security payments in the case of ERTE, the only relief is that you can request a deferral for May and June with a 0,5% interest.
What is clear that it is up to our community to support local small businesses. The self-employed and small businesses have a hard-enough time keeping up with all the regulations, paperwork and costs related to staying afloat. They also are the ones to get the least help in times of trouble it seems. Not only is it less of a carbon footprint to acquire your goods locally, it is also an act of compassion. Please plan on making your necessary purchases from the small companies near you. Refer to our COVID-19 Directory for companies in Mallorca that are open for business.
This is general information and for specific questions and concerns, please contact your accountant or labour law solicitor.
#Covid19GovernmentAids #autonomos #smallbusinesses
By Holly Veneman
2 April, 2020