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State aid nature of tax debt deferrals governed by Royal Decree-Law 7/2020 of 12 March and Royal Decree-Law 5/2021 of 12 March

Following the declaration by the World Health Organization of the international pandemic caused by COVID-19 on 11 March, the rapid spread, both nationally and internationally, prompted the need for urgent measures to cushion the impact of this unprecedented crisis.

Since the first declaration of the state of emergency by Royal Decree 463/2020 of 14 March, various measures have been adopted to support the most affected sectors, i.e. SMEs and the self-employed.

To this end, to avoid possible cash flow stress that these groups might experience, Royal Decree-Law 7/2020, of 12 March, proposed a relaxation of tax deferrals, granting this tax payment facility to SMEs and the self-employed for six months, upon request, on terms equivalent to a three-month grace period.

Subsequently, Royal Decree-Law 35/2020, of 22 December, approved new tax debt deferrals, as explained in the Explanatory Memorandum "granting this tax payment facility for six months, which had already been established in Royal Decree-Law 7/2020, of 12 March, adopting urgent measures to respond to the economic impact of COVID-19".

The Explanatory Memorandum also states that "The measures contained in this Royal Decree-Law that constitute State aid will be established in accordance with the relevant European Union regulations.In particular, where deemed applicable, they shall be configured in accordance with the Temporary Aid Framework-COVID 19 and the Temporary National Framework approved by European Commission Decision SA.56851 (2020/N) of 2 April 2020 and SA.57019 (2020/N) of 24 April 2020 and their amendments".

Royal Decree-Law 5/2021 of 12 March was approved in 2021, extending the possibility of using the deferral mechanism to a fourth month without interest, under conditions similar to those already established in Royal Decree-Law 7/2020, following the amendment made to it by Royal Decree-Law 19/2020 of 26 May.

Commission Communication 2020/C 112 I/01 amending the Temporary Framework for State aid measures to support the economy in the context of the current outbreak of COVID-19, introduces in its paragraph 21 section 3.9 on aid in the form of deferrals of payment of taxes or social security contributions, stating that tax deferrals which are limited, for example, to certain sectors, regions or types of undertakings constitute aid within the meaning of Article 107(1) TFEU.

Furthermore, it provides that the Commission will consider aid schemes consisting of temporary deferrals of payment of taxes or social security contributions applicable to undertakings (including self-employed persons) particularly affected by the COVID-19 outbreak, for example in specific sectors or regions or according to their size, to be compatible with the internal market on the basis of Article 107(3)(b) TFEU.

It adds that this also applies to measures foreseen in relation to tax and social security obligations aimed at alleviating the liquidity difficulties faced by beneficiaries, including, among others, the deferral of payments in instalments, easier access to tax debt payment plans and the granting of interest-free periods, the suspension of tax debt collection and accelerated tax refunds.

On the basis of the above, due to their selective nature since only certain taxpayers carrying out economic activities can benefit, the deferrals provided for in Royal Decree-Laws 7/2020 of 12 March and 5/2021 of 12 March give rise to State aid equivalent to the amount of default interest saved by the taxpayer.

Although Royal Decree-Law 7/2020 of 12 March 2020 was approved before the Commission's Temporary Framework, the National Framework already provided for aid in the form of tax advantages, by stipulating that where aid is granted in the form of tax advantages, the effects do not apply to the measures adopted as soon as they are first authorised by the Commission, but that the aid is deemed to be granted when the tax return for the period from 13 March 2020 to 31 December 2020 is filed, even if the corresponding tax return is filed after 31 December 2020.In other words, by expressly including 13 March 2020, the National Framework includes the aid resulting from the deferrals approved in 2020.With regard to the deferrals that may be granted for tax returns and self-assessments for which the deadline for filing and payment is from 1 April to 30 April 2021 inclusive, it should be noted that the European Commission, in its decision of 23 December 2020, authorised the extension of the temporary national framework until 30 June 2021 and more recently in its decision of 23 March 2021, it authorised the extension until 31 December 2021.

Therefore, the aid deriving from the deferrals, i.e. the tax savings obtained by the taxpayer as a result of the absence of interest on late payment, provided for in the Temporary National Framework notified and authorised by the European Commission, is considered to comply with Community rules and be compatible with the internal market, having the status of State aid.

Subjecting both tax debt deferrals to the Temporary National Framework authorised by the European Commission and its subsequent amendments means that beneficiaries will have to respect the rules on cumulation of the different categories of aid, so that, for example, if they also happen to be beneficiaries of aid in the form of direct subsidies, repayable advances, tax or payment advantages, guarantees, loans and capital, granted both by the General State Administration and by other Spanish Public Administrations, the maximum gross amount of both categories of aid before tax and other deductions (including tax savings obtained from other tax deferrals granted by other Public Administrations), may not exceed the following limits according to sector of activity (considering the total amount of aid received between 2020 and 2021):

  • 225,000 euros, in the primary production of agricultural products;
  • 270,000, in the fisheries and aquaculture sectors;
  • 1,800,000 in the other sectors.

If the company or self-employed person is active in more than one of these sectors, he/she must be able to show for accounting purposes that the relevant ceilings are respected and that the highest possible amount is not exceeded in total.

As provided for in the Temporary National Framework, ex-post monitoring will be carried out so that, if any non-compliance with the cumulation conditions or maximum aid amounts is detected, the beneficiary will be subject to a recovery procedure.

Information regarding the Commission's Temporary Framework and the Temporary National Framework can be found in the "Regulatory Framework COVID-19 Grants" section of the website of the Ministry of Economic Affairs and Digital Transformation:Competence (mineco.gob.es).