Subsidies to businesses adversely affected by COVID-19
About this good practice
Due to COVID-19 severe restrictions on business and human activities were imposed in Lithuania, disrupting the economic cycle. As a result, companies have started to face financial challenges when consumption has fallen and production or services have been disrupted.
For this reason, the Ministry of Economy and Innovation has launched business subsidy programme, to support the liquidity of companies. The support measure has been coordinated with the European Commission in order not to infringe competition rules. The form of support was non-repayable subsidy, taking into account the difficult situation of most companies in Lithuania.
Companies eligible for this support had to comply with these requirements: an annual decrease in turnover of at least 30%; the business was established during the pandemic and did not receive any income.
The following formulas were used to calculate the amount of support for each business: a) 25% of the personal income tax (PIT) paid and/or credited if the amount of PIT paid by the applicant for 2019 was more than €2000; b) a subsidy of €500 if the applicant's PIT paid and/or credited for 2019 is €2000 or less; c) a subsidy of €500 for businesses set up between 1 November 2019 and 30 November 2020 that did not generate revenue between November 2019 and January 2020.
The first call to use this measure was dedicated to SMEs, while the second one also included big companies. The maximum amount of subsidy is limited to €800 thousand per company.
Resources needed
The total budget for the first call was €50 million and for the second one it was €100 million. The measure was administrated by the experts of three different institutions: State Tax Inspectorate, Lithuanian Business Support Agency, Competition Council.
Evidence of success
In the calendar year 2021, 16,622 enterprises benefited from the measure, receiving support for €84,998,645. 925 companies were from Transport and storage sector.
Potential for learning or transfer
COVID-19 disrupted business operations, resulting in financial losses for the companies. Due to the disruption of financial inflows, businesses needed a wide range of support to survive in the market, therefore non-refundable subsidy was crucial in this regard. Although other measures, such as soft loans, have been used in Lithuania, it is the non-refundable subsidy that has attracted the most attention, as companies did not need to make their own financial contribution. As a result, other countries could look at this support instrument to develop their own financial measures in the future if similar crisis would hit their business sector.
Further information
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