European Union: COVID-19 Key EU Developments, Policy & Regulatory Update No. 32

 On 18 January 2021, the European Commission launched a public consultation on a new digital levy, which seeks to ensure that EU rules are responsive to the digital economy and that all companies compete in Europe on fair terms. 

The Commission notes, in particular, that the COVID-19 pandemic has accelerated the transition to a more digital world and boosted revenues for many online companies. Meanwhile, these companies still benefit from tax systems that have not adapted to the global technological developments of recent years.

Commissioner for the Economy Paolo Gentiloni remarked that the fair taxation of the digital economy is an important aspect of building a sustainable recovery to the economic shock of the COVID-19 pandemic, as it is vital that all companies make a sufficient contribution to this effort.

Interested parties may share their views during the 12-week public consultation, which will close on 12 April 2021.

 On 19 January 2021, the European Commission sent a draft proposal to Member States for comment on prolonging and further adjusting the scope of the State aid Temporary Framework initially adopted on 19 March 2020.

Executive VP and Competition Commissioner Margrethe Vestager stated that the draft proposal responds to the second wave of the coronavirus outbreak affecting lives and businesses across Europe.

The draft proposal incorporates initial feedback received from Member States to a survey launched in December 2020. It seeks to extend the State aid Temporary Framework until 31 December 2021 and also aims to raise the ceilings for:

• limited amounts of aid granted (currently up to €120,000 per company active in the fishery and aquaculture sector, €100,000 per company active in the primary production of agricultural products, and €800,000 per company active in all other sectors) and
• measures contributing to the fixed costs of companies that are not covered by their revenues (currently up to €3 million per company).

Additionally, the draft proposal seeks to enable Member States to convert granted repayable instruments (including loans) of up to €800.000 per company into direct grants at a later stage, thus incentivizing Member States to construct their aid as repayable instruments at the outset.

 Since the onset of the coronavirus outbreak, the European Commission has adopted a significant number of State aid measures under Article 107(2)b, Article 107(3)b and under the Temporary Framework. 

The most recent measures adopted to support the economy and companies affected by coronavirus outbreak include:

• Modification to €1.1 billion Italian direct grants scheme to support internationally active companies affected by the coronavirus outbreak
• Extension and budget increase for €970 million in Czech employment schemes to support companies affected by the coronavirus outbreak
• €1.4 million Slovenian scheme for wage subsidies to help businesses affected by the coronavirus outbreak
• €8 million Slovak scheme to support professional sport clubs in the context of the coronavirus outbreak
• €300 million Austrian scheme to compensate event organizers affected by the coronavirus outbreak
• €5 million Latvian scheme to support organizers of cultural events affected by the coronavirus outbreak
• €3.4 million Danish scheme to support TV producers affected by the coronavirus outbreak
• €156 million Lithuanian tax deferral scheme to support businesses affected by the containment measures adopted to limit the spread of the coronavirus
• €79 million Bulgarian scheme to support micro, small, and medium enterprises affected by the coronavirus outbreak