MEDIUM-SIZED ENTERPRISES WILL RECEIVE GRANTS IN RELATION TO OVERCOMING THE ECONOMIC CONSEQUENCES OF COVID-19

At the end of May 2020, the Managing Authority of Operational Programme Innovation and Competitiveness (OPIC) announced for public discussion a procedure for selection of projects for Support for Medium-sized Enterprises for Overcoming of the Economic Consequences of the COVID-19 Pandemic (hereinafter referred to as the Procedure). The Procedure is expected to open for applications in early June 2020. Below you will be informed on the main parameters of the Procedure are and how to apply for financing thereunder.

I. Amount of the Financial Aid and Other Specifics

The total amount of the aid to be granted to medium-sized enterprises under the Procedure shall be BGN 156 million (EUR 79.7 million). Grants shall be given to enterprises until the above-mentioned financial resource is exhausted.

Companies, on their part, shall be able to apply for aid at an amount between BGN 30,000 and BGN 100,000. The grants must not exceed 1% of the net income from sales as declared in the Annual Tax Return for 2019 under Art. 92 of the Corporate Income Taxation Act or Art. 50 of the Personal Income Taxation Act.

Applicants who receive the grants shall have the following obligations:

• To keep their activity within three months counted as of the end of the project;
• To realize net income from sales for 3 (three) months counted as of the end of the project;
• To keep the level of employment in the enterprise on the third month after the end of the project as compared to the level of employment for the month preceding the month of application

In the event of non-performance of any of the above-listed indicators, the beneficiaries shall return the funds, received under the project.

The Procedure provides for two options for payment of the grant – with advance payment and final payment or with final payment only.

II. Eligible Applicants

The applicants shall be eligible in case they meet the following criteria:

• To be traders, registered under the Commerce Act or the Cooperatives Act before 01.01.2019.
• To be medium-sized enterprises within the meaning of the Small and Medium-sized Enterprises Act (SMEA). It is important to note that the concept of “medium-sized enterprise” within the meaning of SMEA does not have an identical meaning with the definition of this concept in the Accountancy Act (AA). It is possible for a medium enterprise within the meaning of AA to not be such within the meaning of SMEA.
• To have realized net income from sales for 2019 at a minimum amount of BGN 3 million but not exceeding BGN 50 million.
• To not be inadmissible applicants as per the demarcation line with other plans and programs financed by EU funds.
• To have registered a decrease of at least 20% in turnover (the net income from sales) for one of the calendar months in the period starting from 01.02.2020 until the month preceding the month of application, as compared to the average monthly turnover (net income from sales) for 2019.
• As of 31 December 2019 to not be an undertaking in difficulty, but to have experienced difficulties after this date as result of the COVID-19 epidemic.

On the other hand, a number of criteria for non-eligibility are also provided for. For example, applicants should not be declared bankrupt, be in insolvency proceedings or in liquidation procedure, along with many more criteria. Applicants operating in the field of agriculture and stockbreeding and the production of food and beverages in this regard, processing and/ or marketing of forest products, in the financial sector, etc. will be ineligible.

III. Eligible Costs

Only costs which have actually been paid on behalf of the beneficiary shall be considered as eligible for financing under the procedure. These costs must be reflected in the accounting documentation and an adequate audit trace shall be present for them. Another important requirement is that the products and services are actually delivered upon payment.

The Procedure shall finance costs which are necessary for overcoming of the shortage of funds or lack of liquidity due to the epidemic boom of COVID-19, as follows:

• Costs for the purchase of raw materials and consumables intended for use in the activity for the purpose of production or services;
• Costs for external services (incl. overheads);
• Personnel costs (incl. cost of gross employment remuneration and social security and health insurance contributions paid by the employer).

It is important to note that a detailed list of costs that will not be funded (ineligible costs) is provided. Ineligible for funding will be costs for activities that were started and actually completed or fully implemented before 01.02.2020, regardless of whether all related payments have been made. In addition, costs financed by public funds will not be eligible for funding under the Procedure in question. Due to this fact, it will not be possible to finance the cost for remuneration of employees for whom the applicant already receives compensation under Decree № 55 dated 30 March 2020 (the so-called 60/40 measure). However, this does not prevent applicants who receive compensation under the latter Decree from applying for funding for other costs under the Procedure discussed in this material. Financing of the same costs under the Procedure described herein and other public funding programs (regardless of whether it is with EU funds or from the state budget) shall not be possible.

IV. How to Apply for the Grant?

The application will be made entirely online by filling in a web-based application form and submitting the form and the accompanying documents through the Information System for Management and Monitoring of EU Funds in Bulgaria (UMIS 2020) solely with a valid Qualified Electronic Signature (QES).

The following documents shall be attached along with the application form:

• Declaration for the circumstances under Art. 3 and Art. 4 of the SMEA;
• Declaration for the financial information;
• Declaration that the applicant is familiar with the Terms and Conditions for application and the Terms and Conditions for performance;
• Declaration for consent for the provision of the applicant’s information by NRA to the Management Authority;
• Administrative contract for the provision of the grant, signed with a QES;
• Explicit Power of Attorney for submission of the project proposal and for signing of the administrative contract for the provision of the grant;
• Income statement for the selected calendar month (for the period between 01.02.2020 until the month preceding the month of application), according to which a decrease in the net income from sales is registered as compared to the average monthly turnover for 2019.

The final term in which project proposals may be submitted shall be 30 days counted as of the date of announcement of the Procedure. Since the procedure is still at the stage of public discussion, the date of opening is not yet known.

The team of AFA monitors the topic and remains at your disposal in case you need assistance in applying or advice in connection with the Procedure.

This material is not exhaustive, is only of general nature and does not represent a specific advice or consultation. Should any additional questions arise, please do not hesitate to contact us at tel.: 02/943 37 00, fax: 02/943 37 07, е-mail: office@afa.bg or at: 38, Oborishte Str., Sofia 1504.