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Brussels allowed the rescue of real estate
The European Commission approved the 101.5 million project prepared by Lithuania before the long weekend in May. Euro real estate (RE) rental compensation scheme. Their goal is said to be to reduce the sudden liquidity shortage faced by tenants operating in certain sectors due to measures imposed by the Lithuanian state to limit the spread of the coronavirus. Public support will be provided in the form of direct grants to cover part of the rents payable by these companies.
“This € 101.5 million plan prepared by Lithuania will mitigate the economic impact of the crisis on companies operating in many of the sectors affected by the outbreak, including hotels, restaurants, shops and sports, by covering part of their costs for rent. ” Margrethe Vestager, European Commissioner for Policy.
It is already possible to request
Businesses whose activities have been suspended or restricted due to the coronavirus crisis can apply for state support for the lease of real estate from the beginning of this week; the state will compensate them with 50%. rental. However, they will receive support if at least 30%. the owner will give them a discount and 20 percent. the company itself will pay.
The Acting Minister for Economy and Innovation, the Minister for Energy Žygimantas Vaičiūnas, announced on Monday that such support had been agreed with the European Commission.
“Due to the discounts granted by the real estate manager and the state subsidy, the costs incurred by the business for the rental should decrease by up to 80%,” Ž.Vaičiūnas explained.
Companies with annual income in 2019 can apply for rental subsidies. It did not exceed 50 million. EUR or the book value of the assets in 2019. December 31 did not exceed 43 million. and entrepreneurs whose activities have been (are) prohibited by a government quarantine decree. Grants will be paid during the quarantine period and for two months after their end.
The beneficiaries will be mainly large commercial real estate companies or investment funds in which richer people have invested.
Local rental costs are not reimbursed from state funds to companies whose main activity is electronic commerce, specialized retailing of arms and ammunition, activities of organization of gambling and betting or other games of chance, activities of institutions financial.
“Focusing on small and medium-sized companies, we have also assessed the situation that a number of companies have a relatively large number of employees due to the details of their activities. In this case, the number criterion will not apply, which it means that the companies with the number is more than 250, “he said.
The minister emphasized that under this model, the tenant will have to pay up to 20 percent. rental.
“We appreciate that this is an important tool for companies and we also realize that revenues will not be recovered quickly, those companies that were banned during the quarantine period would be eligible for this compensation not only during the quarantine period, but for two additional months after quarantine, “he said. Vaičiūnas.
Incidentally, the government’s deliberations on whether the compensation mechanism should also apply to those companies and tenants who have concluded state real estate leases have lasted longer.
For and against
The Lithuanian Association of Commercial Companies approved the decision on rental subsidies for commercial real estate. Although at the time of consideration, it was proposed to differentiate the amount of support by determining the compensatory part of the rent based on the part of the lost income. For example, if store revenue decreases by 80-100 percent. – 90 percent. Rental subsidy payable in case of loss of 60-79%. income – 70 percent. rents payable if income is reduced by 40-59%. You should receive 50 percent. subsidy
At the same time (already in mid-April), the Bank of Lithuania negatively evaluated the LTL 100 million prepared by the Government. Real estate lease compensation measure. According to the central bank, it is equivalent to an exclusive subsidy for companies in one sector: commercial real estate, that is, mainly for office and supermarket owners.
“This means that the direct beneficiaries of such state support will be primarily large commercial real estate companies or investment funds in which wealthier individuals have invested. Such generous state aid for one sector is not fair to other sectors and reduces the effectiveness of government business support package. ” The evaluation was published by the Bank of Lithuania.
According to its representatives, part of the business, without waiting for any decision from the Government, consulted on real estate problems. Several landlords and tenants have found compromise agreements that do not require additional government expenses.
Victims will be proactive
Dalia Matukienė, President of the Council of Small and Medium Enterprises, regretted that this compensation has been significantly delayed. Some entrepreneurs paid reduced rents to real estate owners in the first month of the crisis, others deferred payments, and others were generally allowed not to pay during quarantine.
“The saddest thing is that those owners who have shown initiative and have already agreed on how to solve the problems of renting the premises will no longer receive those subsidies,” he told Kauno Diena. “And those, so to speak, dishonest, who did not make any concessions, will receive and, as always, will be big tenants. The little ones always sympathize with each other, consult and eventually suffer.
However, the Small and Medium Business Council supported this idea, and that money should be paid not to real estate owners but to tenants. Some homeowners disagree with that 30 percent. concessions, although their representatives had not promised less when they discussed this support. Of course, this is just the beginning of the crisis, maybe it will take off over time. “
Dalia Matukienė: Part of the tax deferred for us for two months. Who will have to pay them after the business has been suspended for those two months?
D. Matukienė noted that due to real estate leasing subsidies, many unnecessary requirements have generally been established. The lease must be registered in the Registration Center.
It is necessary to have invoices for the rental services provided in 2020. in February and the months in which the refund was granted.
Only companies that in 2019 can request assistance. they were not considered to be in distress at the end of 2020, they do not have the status of a bankrupt, restructuring or liquidation company, and they started operations no later than 2020. March 16 Companies must also have submitted a set of financial statements to 2019. Records Center.
“Now everyone will go to the Registration Center to register a contract. And what’s the point?” Said the representative of small and medium entrepreneurs. “That everyone will have to pay 20 euros to the Registration Center. Who needs that contract? Some have them but do not issue invoices, others do not” But after all, if the companies are legal, they still pay taxes. And what’s the point of the requirement that the company not have had a problem last year? If you are late in settling accounts with someone, you will not receive any subsidy. “
He felt that either of them did not understand the small business tax system, its requirements, and was doing it all at once. Or it is maliciously thought that a third or even half of the entrepreneurs will shake hands and will not resort to that support to leave unused money.
30% uncollected. entry
And the money in the state’s pocket is constantly shrinking. This week Finance Minister Vilius Šapoka announced that revenue collection in April was almost a third lower than expected. According to preliminary data, about 31.1 percent, or 221 million. 28.5% euros, or less than expected, or 195 million euros. less than in April of last year.
50 percent – that part of the rent will be reimbursed by the State if the landlord provides at least 30%. rental discount
“If we continue working like this, in two months the budget revenue will reach zero,” Matukienė told Kauno Diena. borrowers are needed to close Sodra and other budget holes.
The little ones will be killed. And it doesn’t matter at all what will happen to the business. It took a month and a half for real support measures to emerge, but they did not. The Council of Small and Medium Enterprises proposed to pay the benefits immediately, as in Germany, Austria, Switzerland. Give money urgently and do not send your employees to employment services at downtime.
Small business owners say that we have been considered thieves all our lives, we have suffered, but the way they ridicule us now is the last straw. People are very disappointed. “
And the small explanations of the Minister of Finance V.Šapoka do not console small entrepreneurs at all that there are currently deferred taxes of more than 330 million. almost 200 thousand euros. Commercial entities, both companies and individuals, dedicated to individual activities.
“We have postponed part of the taxes for two months. What will we have to pay when those two months of business have been suspended? The bankruptcies will begin in two months,” said D. Matukienė, president of the Council of Small and Medium Enterprises.
Commentary
Marius Jurgilas, member of the Board of the Bank of Lithuania
Under current proposals, this measure would provide landlords with 70%. the flow of income from rental income compared to the situation before the quarantine was issued, and no other business sector in the country has such exceptional conditions. In turn, tenants, most of whom are likely to be small businesses, will need to contribute 20 percent. funds, even if they don’t receive any income from your business during quarantine.
The biggest beneficiaries, with the state offsetting part of the rental income, are likely to be large Lithuanian and foreign business groups managing commercial real estate and real estate funds, which own most of the modern shopping malls operating in Lithuania. The need for a critical helpline for such entities is generally questionable, as the financial situation of most of these real estate owners, unlike companies that have ceased quarantining, may be sustainable and Trading risks are widespread. In other words, if quarantine restricts the activities of some sectors, the income of companies in other sectors of rented premises may be sufficient to maintain the buildings and cover the financial obligations of real estate managers.
The sectors most affected by the quarantine rent commercial, hotel and restaurant premises, with a useful area of 8 million throughout Lithuania. kv. m. Of these, about 13 percent. It consists of modern supermarkets owned mainly by large owners. In addition, approximately two-thirds of the buildings and premises dedicated to the activities most affected by the quarantine are not rented at all, so the businesses that own the premises would not be eligible for government support and the full burden of business. to maintain and purchase these buildings (if purchased with a loan). assumes the cost of doing business. In this case, the real estate market may be distorted, providing greater incentives for the rental and ownership of real estate.
This exceptionally generous state aid for one sector, dominated by large companies and the wealthiest sectors of society, is not fair to other sectors and reduces the effectiveness of the government’s business aid package, which is limited in size. By way of comparison: INVEGA’s new direct loans to all other Lithuanian companies also amount to LTL 100 million. EUR, that is to the same extent as this planned real estate lease compensation measure, which aims to secure the income of only one sector: real estate landlords. In addition, the measure can reach homeowners who are not having trouble meeting their obligations and for whom the measure would simply continue to generate significant profits in the event of an economic shock.
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