COVID-19: Keep the overview
May 2021
COVID-19: Keep the overview
On 12 March 2020, the WHO declared the COVID-19 outbreak a pandemic. Since then (as of mid-April 2021), 2.9 million people have died in connection with COVID-19. This death toll is staggering. However, it should not be forgotten that in every "normal" year many more people die of hunger or the dangerous Ebola virus has broken out again in 2021, e.g. in Congo.
As a result of the Corona pandemic, most countries have imposed very far-reaching measures and restricted people's basic rights. In order to mitigate the negative financial impact of these measures to some extent, various aid offers have been launched.
Short-time work compensation (KAE)
As one of the most important immediate measures, the hurdles to obtaining KAE were significantly lowered and the procedure simplified. This simplified procedure has been extended until 30 June 2021.
Thus, low earners (max. CHF 3,470) will receive 100 % KAE between 1 December 2020 and 30 June 2021. The deductible for employers has been abolished for March 2020 to June 2021 (from 1 July 2021 it is to be one day). KAE can also be claimed on an existing overtime credit (until June 30, 2021). Since 1 September 2020, the maximum duration of entitlement is 18 months (previously 12 months), although the Federal Council has the right to increase the duration to 24 months.
The employer must submit a pre-announcement. The cantonal compensation office examines the application. Subsequently, the statement of account must be submitted within three months of the end of the entitlement period.
Until the end of 2020, applications and statements of account were submitted to the AWA (Zurich); since 1 January 2021, applications and statements of account have been submitted centrally via a Seco platform (www.arbeit.swiss).
The amended COVID 19 Act came into force on 20 March 2021. After that, a prior notification must still be submitted, but the prior notification period has been lifted and the authorisation is valid for six months. A waiver of the prior notification period is also possible retroactively from 1 September 2020. However, the application and the adjusted accounts had to be submitted by 30 April 2021 at the latest.
Further tightening was imposed on 18.12.2020. Those affected by these measures can claim retroactive short-time working compensation. This claim and the corresponding statements of account also had to be submitted by 30 April 2021 at the latest.
The Cantonal Court of Lucerne ruled on 26 February 2021 that holidays and public holidays should be taken into account in the KAE. SECO has announced that it will continue to appeal this decision and asks that no such applications be submitted....
Hardship funds
The fixed costs of businesses that have to remain closed as a result of the measures adopted are not covered and in some cases lead to high losses for them. It was therefore decided to support these companies with loans and à fonds perdu contributions (COVID 19 Hardship Ordinance).
An affected company must have its registered office in Switzerland (Art. 2 para. 1) and be profitable and viable (Art. 4 para. 1 lit. a). It must also have already taken measures to protect its liquidity and capital base (Art. 4 para. 1 lit. b), and the loss of revenue must be at least 40 % compared to the average for 2018 and 2019 (Art. 5 para. 1).
Anyone who had to close their business for at least 40 days between 1 November 2020 and 30 June 2021 will benefit from relief in terms of the evidence to be provided (Art. 5b).
Holdings which have had to cease only part of their activity may apply for support by means of a divisional statement for these affected areas (Article 2a).
The hardship contributions that do not have to be repaid (À-fonds-perdu contributions) are limited to 20 % of the average annual turnover 2018/2019 for companies with a turnover of up to CHF 5 million, but to a maximum of CHF 1 million (Art. 8a). Companies with low fixed costs and a small margin benefit from this method of calculation.
If no À-fonds-perdu contributions are claimed, but loans, guarantees or sureties are, these are limited to 25 % of the relevant average turnover 2018/2019, but to a maximum of CHF 10 million. The maximum term of the loans is 10 years (Art. 8).
Those claiming hardship funds may not pay loans or dividends to their shareholders (Art. 6).
In connection with COVID 19 credits, the auditors have a duty to report and notify if the credits are misused.
Rent reduction - Basel meets Zurich
In December 2020, Parliament rejected the idea of granting a general, nationwide rent waiver at the expense of landlords to companies that had to close their businesses as a result of the measures imposed.
However, Albert Leiser of the Zurich Homeowners' Association, together with other supporters, has campaigned for the Basel three-thirds model to be adopted in the Limmat city as well. The city of Zurich has made 20 million francs available for this purpose.
Applications could be submitted by the landlord until April 30, 2021. Requirements include:
- These are business premises in the city of Zurich.
- An agreement is reached between the tenant and the landlord whereby the tenant will only have to pay one third of the rent for at least one month from 01.12.2020 to 30.04.2021.
- The lease is not under notice.
- There is no legal or economic dependency between the tenant and the landlord.
- The tenant must be a company that is neither in liquidation nor in bankruptcy proceedings.
- The tenant is affected by an official closure from 1 December 2020 or has suffered a loss of turnover of at least one third from 1 December 2020 to 28 February 2021.
The City of Zurich's one-third share amounts to a maximum of CHF 8,333 per month's rent.
Effects on accounting and financial reporting
In practice, short-time work compensation is likely to be offset against personnel expenses in the majority of cases. If these KAE are material, they must be broken down in the notes (Art. 959c para. 1 item 2 CO). In my view, it is also permissible to disclose them as extraordinary income and at the same time explain them in the notes (Art. 959c para. 2 item 12 CO).
The COVID 19 loans must be reported as debt capital, even if they are not to be taken into account as such for the over-indebtedness notification pursuant to Art. 725 para. 2 CO. As a rule, the loans are likely to be long-term and interest-bearing. The conditions of the loans must be disclosed in the notes (amount, duration, interest rate, conditions or restrictions). Loans from the cantons under their hardship programmes are to be treated in the same way.
In the case of À-fonds-perdu contributions, the question arises as to when these are considered to be realised and may be recognised in profit or loss. Some scholars take the view that this occurs when an application is approved. The contributions are to be booked as extraordinary income. In the notes to the financial statements, the receipt of such contributions must be disclosed as an event after the balance sheet date (Art. 959c para. 2 item 13).
From an accounting point of view, the question also arises as to whether the business can generally be continued (for at least another 12 months) or whether the accounting must be converted to disposal values. In this context, a lack of liquidity may also impair the ability to continue as a going concern.
Of course, the value of assets must also be reassessed on the basis of the current situation. If this is impaired, write-downs or value adjustments must be made accordingly. Typical items could be: inventories, receivables, loans, investments, intangible assets, etc.
Handling of value added tax
No interest on late payments will be charged by the Federal Tax Administration (FTA) for the period from March 20, 2020 to December 31, 2020.
According to the FTA, short-time work compensation does not constitute taxable turnover, as it is not matched by any benefits. The amount must be reported in item 910 "Other cash flows" of the VAT statement. KAE therefore do not lead to any input tax correction.
If a company receives funds on the basis of the COVID 19 hardship case ordinance, these are subsidies that must be recorded in the VAT declaration in item 900. In the case of companies that use the effective method of accounting, such à fonds perdu contributions as well as the uncollected interest or a possible partial waiver (in the case of loans) therefore lead to an input tax correction. If the funds are only reimbursed for a partial area on the basis of a divisional invoice, this must be taken into account accordingly in the input tax correction.
Effects on payroll accounting
When making wage declarations, especially if payroll accounting is not used, it should be noted that if the gross wage is reduced by 20% as a result of short-time work, 100% of the wage is nevertheless insured and must be settled with the social insurance funds.
In the salary statement, short-time allowances must be shown in item 7 of the salary statement. Changes to the employment relationship made in the course of the pandemic may also have an influence on the correct preparation of the salary statement: Changes in the workload, home office compensation, early departures, etc.
Many cantons, such as Zurich, take a pragmatic approach and try to disregard the effects of the home office as far as possible when taxing employees. Travel costs or the deduction for meals away from home are allowed for deduction as if the home office activity had not existed. In return, however, additional costs due to the work at home are generally not taken into account. This solution is likely to be advantageous for most employees. Companies are relieved of an additional administrative burden.
Conclusion
The full impact of the Corona pandemic can hardly be assessed at this point in time. This does not only concern the medical side. The medium and long-term effects on society, the legal system, education, public finances and the economy, one gets the impression, have hardly been considered.
Let's try to make the best possible use of the state aid on offer. Perhaps this will contribute to the fact that as many people as possible will soon regain a perspective and will be able to contribute with joy and optimism to the further development of our country.
Sources:
- • Questions around short-time work
- • COVID-19 Act
- • COVID-19 Solidarity Guarantee Act
- • Hardship programme, Zurich, 3rd round
- • COVID-19 hardship case ordinanceg
Disclaimer: This publication is provided to users for information purposes only. In case of disagreement, one has to refer to the cited sources, relevant laws and publications alone. This letter contains a strong summary assessment by the authors. For an individual clarification of the respective facts, please contact us or the relevant authorities directly.
Honold Treuhand AG
Status May 2021