Guaranteeing existing loans issued to businesses and issuing new revolving loans
Minister of Finance Martin Helme told Delfi already on March 19 that a plan to guarantee existing commercial loans issued to businesses and issuing new loans was being drafted. By now the details have been published by the state-controlled foundation responsible for issuing the loans and implementing the guarantees, Kredex. In order for undertakings to emerge from this crisis as soon as possible, having suffered only minimal losses, KredEx is ready to take on higher risks than before via new and existing guarantee and loan measures, the foundation states on its webpage. In addition to existing companies, new financial measures will be taken to help starting new companies, such as startups, in Estonia.
Kredex has created a special website where entrepreneurs can find a lot of useful information to find suitable solutions during the COVID-19 situation.
Additional measures are also being taken to support agriculture. Information can be obtained from Estonian Rural Development Foundation.
Postponing tax payments without interest made possible
The Estonian Tax and Customs Board will not apply interests if companies postpone their tax payments for March and April. In addition, to help fight the economic effects of COVID-19, the need for sole proprietors to prepay their social tax for the first quarter of 2020 has been cancelled.
In order to relieve the financial situation of businesses, the Estonian Tax and Customs Board have suspended the calculation of interests on their tax arrears for the period of emergency with retroactive effect from 1 March to 1 May, tEstonian Tax and Customs Board announced. From 1 May the interest rates will be reduced from the current 0.06 per cent to 0.03 per cent (effective for an indefinite period). Interest rates on tax arrears paid in instalments by up to 100 per cent in the future. At present, the maximum possible interest reduction is 50 per cent.
The state will pay advance social tax to sole proprietors in the first quarter. If the sole proprietor has already paid the advance social tax, he or she can use the amount to cover any tax liability, either immediately or in the future, or may ask for the transference of this amount into his or her bank account.
Estonian Tax and Customs Board has created a webpage where you will find the information about effects of the emergency situation on the subjects related to taxation and customs, and customer services of the board.
Temporary measures to prevent unemployment
Temporary measures to prevent unemployment and help businesses in difficulties are already being taken. Estonian Unemployment Insurance Fund has proposed that it will cover 70 per cent of their employees’ original wages to Estonia’s businesses that are having difficulties because of the COVID-19 situation. Two months wages will be covered by the mechanism (March 1 to May 31).
The subsidy is paid, when an employer is in a situation where they comply with at least two of the following terms:
- The employer must have suffered at least a 30% decline in turnover or revenue for the month they wish to be subsidized for, as compared to the same month last year.
- The employer is not able to provide at least 30 percent of their employees with work.
- The employer has cut the wages of at least 30% of employees by at least 30% or down to the minimum wage.
Both private and state organizations are eligible for the subsidies, independent of the size of the organization. The amount of the subsidy will be 70% of the average monthly wage of the employee. The maximum amount of the subsidy is € 1,000. In addition to that, the employer must pay a wage of at least €150 to the employee.
More information can be found on Estonian Unemployment Insurance Fund’s webpage.
Reducing excises on diesel fuel, gas, electricity
Excise on diesel fuel will be lowered by 25 per cent according to Minister Helme quoted by Delfi – to a level lower than in neighbouring countries, helping to keep the excises in Estonia and supporting the local transportation sector. Excise on gas will be lowered by 7.1 per cent, to 40 euros per 1,000 cu m and excise on electricity by 3.1 per cent.
Lowering port taxes
To support shipping, port charges for passenger vessels will be lowered by 75 per cent. The charges already covered by the companies during the first quarter of 2020 will be paid back. Reductions will also be made in employment taxes for those companies, according to the Minister.
A B2B workforce sharing platform
Because of the current situation, there are companies that have human resources that they cannot use – and others who are short of work hands. One of the ideas that was made a reality as a result of the Hack the Crisis hackathon last weekend was Share Force One – a workforce sharing platform that connects B2B sides for temporary workforce exchange. Share Force One works in partnership with Estonian Unemployment Insurance Fund. The solution is live and free to use to all of Estonia’s businesses.
Aid to event-organisers who have had to cancel
The state will compensate for the direct costs of cultural and sporting events cancelled due to coronavirus in March-April, in a total sum of up to 3 million euros. According to Minister Helme, in addition to other institutions, different religious organisations will receive aid.
Lowering taxes for online media
Value added tax for online journalism will be lowered from 20 per cent to 9 per cent, according to Martin Helme.
A single contact point for information
The Ministry of Economic Affairs and Communications has created a single contact point for Estonia’s companies in need of information during the spread of COVID-19. A special webpage with frequently asked questions (currently available in Estonian) and a special information e-mail address have been created. In additon, regular webinars will be held to provide businesses with needed information.
Cooperating with businesses to fight the challenges
While the state is already helping and further preparing to help its businesses, companies are contributing, themselves. The Ministry of Economic Affairs has started a web portal to collect information from businesses that are willing to help the government with their resources, either material ones or knowledge. According to Kaimar Karu, the Minister of Foreign Trade and Information Technology, there is a need for the government to help its citizens and companies as much as possible during the COVID-19 situation – and at the same time there are businesses that are ready to contribute their resources in order to help the government to tackle the obstacles. “We opened a simple website in the eesti.ee portal where entrepreneurs can declare the kind of tools or competence with which they can help. We will collect this information and distribute it among agencies,” the minister said. According to Ärileht, by the end of March, 240 companies had announced their interest to help the state with their services or knowledge.
Letting startups hack the crisis
Tens of startups across the country are contributing with ideas and solutions – both as a result of the Hack the Crisis hackathon mentioned above and independently. For example, Sixfold, a company founded by experienced Austrian and Estonian IT entrepreneurs made its border crossing times live map available to anyone for free. This will help logistics companies, both in Estonia and across Europe and hopefully reduce the effect the crisis has on logistics in Estonia. “What makes it possible for us to hack the crisis is, on the one hand, our volunteers’ willingness to contribute their valuable time and knowledge, and on the other hand, our government’s willingness to take the solutions offered by tech-savvy volunteers seriously,” said Michaela Snopková, Head of the eeBot team, another group of volunteers hacking the crisis by creating a state-approved automatic crisis-chatbot. “I am also happy to see that there are various other teams across the nation doing the same – we are fighting side-by-side, using technology to tackle the various effects of the current situation.” Estonia’s country-wide corona-hacking initiative has already gone international as it has been adopted by other countries. Corona-hackathons are being held worldwide: the WirVsVirus Hackathon in Germany, Hack the Crisis in Finland, Hack the Crisis in Lithuania, Tech4Covid19 in Portugal, Hack Force in Latvia, and Hack the Crisis in Poland.
Planning measures to support tourism
On March 31, Viljar Lubi, Estonia’s Undersecretary for Economic Development told Kanal 2’s news show Reporter that as soon as it is possible to start cross-border movement of people again, measures will be introduced to support the tourism sector that has been seriously affected by the current situation. According to Minister Helme, Enterprise Estonia will be responsible for developing the measures.
Various guides to cope with the current situation as an entrepreneur and an employer have been produced by business organisations across Estonia. For example, the lawyers of the Chamber of Commerce and Industry have prepared an overview of the possibilities that the Employment Contract Act offers for employers that can be found here.
As the government has announced that new economic measures will follow, this story will be updated throughout the emergency situation related to COVID-19. If you are a foreign investor or considering to start your business in Estonia, and need information, the best way to contact Estonian Investment Agency during the COVID-19 situation is sending us a request for e-Consulting. The agency is currently working in fully online mode, however all the services that can be provided via digital means are still being provided at the same level as before (with e.g physical meetings replaced by online business lunches).