Rules have been approved for granting subsidies to SMEs and socially oriented non-commercial organisations as compensation for costs on preventing COVID-19

Pepeliaev Group advises that on 2 July 2020 the Government, in its resolution No. 976[i], approved the rules for granting direct free-of-charge non-recurring financial aid from the government (a “subsidy”) to individual categories of small and medium-sized enterprises (“SMEs”) and socially oriented non-commercial organisations (“SONCO”) for the recipients of subsidies to get a partial compensation for the costs on taking measures in 2020 to prevent the new coronavirus infection (the “Rules”).

The Rules establish that the subsidies are to be granted based on the register of subsidy recipients that the Russian Federal Tax Service (“the Federal Tax Service”) forms within the limits provided for by the budgetary obligations for the above purposes of which the Federal Treasury is notified.

I. The conditions for a subsidy recipient to be included in the register of subsidy recipients (should be met in the aggregate and apply to each of the categories of persons entitled to subsidies)

Person entitled to receive a subsidy	Conditions a person should meet to be included in the register of subsidy recipients
SME (entity or individual entrepreneur)	1. As at 10 June 2020 the applicant is included in the unified register of small and medium-sized enterprises. 2. The applicant’s area of activity under the primary OKVED code (the code of the Russian Classification of Economic Activities) set out in the Unified State Register of Legal Entities/Unified State Register of Individual Entrepreneurs as at 10 June 2020 is included in the list of sectors that need support in taking measures to prevent the new coronavirus infection determined in annex No. 3 to the Rules[ii], or tourist industry facilities including hotels, with a room capacity not exceeding 100 rooms, ski trails and beaches owned by the subsidy recipient or belonging to the subsidy recipient on any other legal grounds as at 10 June 2020, are included in the unified list of qualifying hotels, ski trails, and beaches. 3. The organisation is not under liquidation, no bankruptcy proceedings have been initiated against it, and no decision has been made to exclude it from the Unified State Register of Legal Entities; the activity of the individual entrepreneur has not been terminated and the individual entrepreneur has not been deregistered by the tax authorities as at the date when the subsidy is obtained. 4. The debtor’s tax and insurance contribution arrears as at 1 June 2020 do not exceed RUB 3,000. This amount is calculated taking into account all the existing arrears and overpayments (penalties, fines and interest are not taken into account). The amount is calculated based on the data available to the tax authority regarding the repayment of the arrears as at the date of applying for the subsidy. That is to say, the tax authority may not refuse to enter a taxpayer into the register of subsidy recipients referring to arrears as at 1 June 2020 if such arrears have subsequently (before the application date) been repaid. 5. The applicant had submitted report SZV-M for May 2020 with the Russian Pension Fund before 15 June 2020. 6. The applicant has filed an application for a subsidy with the tax authority (see section II “The procedure for filing an application for a subsidy” of this alert).
SONCO	1. As at 1 July 2020 an applicant classified as a SONCO which is (a) a private educational organisation licensed to carry out educational activity as its primary activity in accordance with the purposes for which it was established, is entered into the register of non-commercial organisations most affected against the backdrop of the deteriorating situation caused by the spread of the new coronavirus infection[iii], or (b) a supplier of social services, is entered into the register of SONCO[iv]. 2. The organisation is not undergoing liquidation, no bankruptcy proceedings have been initiated against it, and no decision has been made to exclude it from the Unified State Register of Legal Entities 3. The debtor’s tax and insurance contribution arrears as at 1 June 2020 do not exceed RUB 3,000. This amount is calculated taking into account all the existing arrears and overpayments (penalties, fines and interest are not taken into account). The amount is calculated based on the data available to the tax authority regarding the repayment of the arrears as at the date of applying for the subsidy. That is to say, the tax authority may not refuse to enter a taxpayer into the register of subsidy recipients referring to arrears as at 1 June 2020 if such arrears have subsequently (before the application date) been repaid. 4. The applicant had submitted report SZV-M for May 2020 with the Russian Pension Fund before 15 June 2020. 5. The applicant has filed an application for a subsidy with the tax authority (see section II “The procedure for filing an application for a subsidy” of this alert).

II. The procedure for filing an application for a subsidy

An application made in accordance with the form set out in annex No. 2 to the Rules may be filed with the tax authority in accordance with the location of the organisation (the individual entrepreneur’s place of residence) in electronic form (by using the personal account of the legal entity or of the individual entrepreneur, or by using TCCs ), or in hard copy via mail.

If the application is signed and sent by a representative we recommend that the application should be accompanied by a copy of the power of attorney.

The application should be filed within the period between 15 July and 15 August 2020 inclusive.

III. The amount of the subsidy will be calculated by multiplying the number of workers employed by the subsidy recipient in May 2020 by RUB 6,500 plus RUB 15,000 (with regard to organisations and individual entrepreneurs).

For individual entrepreneurs that do not have employees the subsidy will amount to RUB 15,000.

The Federal Tax Service will independently determine the number of a subsidy recipient’s employees based on the data of the Russian Pension Fund taken from SZV-M reports for May 2020 that, in turn, have been filed with the Pension Fund by the subsidy recipient. Consequently, the Rules determine that the subsidy recipient is responsible for the accuracy of such information, and if it is found that the subsidy recipient has misrepresented the individual (customised) reporting data, the applicant will have to return to the state budget any subsidy it may have received.

IV. The procedure for considering an application for a subsidy

The application for a subsidy will be examined within 3 business days from the date on which the Federal Tax Service receives the application.

The tax authority will check the application for whether the information stated in it conforms to the conditions for receiving the subsidy and for the completeness, correctness and accuracy of the information specified, as well as whether it conforms to the data available to the tax authority (according to the Rules this includes such information conforming to the bank account data that banks have submitted to the tax authority).

Therefore, the reasons for a subsidy to be denied, beside a delay in filing the application, may be as follows: the applicant does not meet the conditions for being entered into the register of subsidy recipients; the application contains details that do not correspond to the information available to the tax authority, or incomplete and inaccurate data; the procedure for drawing up and filing the application has been violated (the application has not been signed or has been signed by a person which is not authorised to do so or the application has been filed with a wrong tax authority).

If there are no grounds for a subsidy to be denied, the Federal Tax Service will calculate the amount of the subsidy, form an electronic register of subsidy recipients and file it with the Federal Treasury, and the Federal Treasury will pay the subsidy in accordance with the bank details specified in the application.

The Federal Tax Service will inform the applicant of the fact that the subsidy is payable via the taxpayer’s personal account on the website of the Federal Tax Service or via mail.

What to do

Organisations and individual entrepreneurs that meet the conditions set out in the Rules for being entered into the register of subsidy recipients should use the new measure of support from the government.

Help from your adviser

Pepeliaev Group's lawyers have extensive experience of advising on any issues relating to the application of Russian legislation, including the issues of obtaining subsidies. We are ready to provide legal support with respect to any issues arising when applicants reach out to the Federal Tax Service, including issues connected with receiving subsidies that are granted as partial compensation for the costs on taking measures in 2020 to prevent the coronavirus infection, and with respect to any other legal is