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Factsheet for measure LV-2020-45/1716 Updated – measures in Latvia

Grant for working capital flow

Grants apgrozāmo līdzekļu plūsmas nodrošināšanai

Country Latvia , applies nationwide
Time period Temporary, 01 November 2020 – 30 June 2021
Context COVID-19
Type Legislations or other statutory regulations
Category Supporting businesses to stay afloat
– Direct subsidies (full or partial) or damage compensation
Author Kriss Karnitis (EPC) and Eurofound
Measure added 17 January 2021 (updated 26 May 2022)

Background information

On 18 December 2020 the Government approved regulations Nr. 676 on support to companies affected by the COVID-19 crisis to ensure the flow of working capital. The regulations set in force procedures of granting one-off state support to companies affected by the crisis - a grant to compensate for the fall in working capital flows.

Content of measure

The grant for working capital flow is available one time – either for November or December 2020. Companies are eligible for this support if their turnover has decreased by at least 20% in November or December 2020 if compare with an average income in August, September, and October 2020 and has decreased by at least 30% if compared with the respective month in 2019.

The amount of the support is 30% of total gross wages paid in August, September, and October 2020. The maximum amount of support available for one company is €50,000 and the maximum amount for "connected companies" can not exceed €800,000. It is considered that companies are "connected companies" if a company has a control in another company according four conditions described in law.

€70.8 million has been allocated for this support measure.

On 12 January 2021 the Government changed several aspects of the measure. The support will be available on a monthly basis, the amount of the support will be 60%, and the maximum was raised to €100,000. These changes are pending for approval from European Commission.

Updates

The following updates to this measure have been made after it came into effect.

08 November 2021

Based on this support measure the Government developed a new measure in November 2021: Grant for working capital flow (re-introduced) .

04 March 2021

After receiving the approval from European Commission, from 5 March 2021, grants for ensuring the flow of working capital become available to companies in accordance with the extended conditions adopted by the Cabinet of Ministers on 28 January, 4 February and 18 February. For November and December 2020, the support mechanism remains as described.

From January to May 2021, the grant is available to companies whose turnover in the respective month meets at least one of the following criteria:

  • in the month of the support period the turnover of the enterprise has decreased by at least 20% compared to the average turnover in August, September and October 2020, and for which the turnover in the month of the support period has decreased by at least 30% compared to the turnover in the respective month in 2019 or 2020;
  • company is registered as a taxpayer after 1 January 2020 and for which the turnover in the month of the support period has decreased by at least 20%, compared to the average turnover in August, September and October 2020;
  • started economic activity after 1 January 2019 and for which the turnover in the month of the support period has decreased by at least 20%, compared to the average turnover in August, September and October 2020;
  • in the month of the support period, the turnover of the company has decreased by at least 30% compared to the corresponding calendar month of 2019, and the turnover of which has exceeded 10% of the turnover of the corresponding calendar month of 2019 for at least three months since 1 April 2020.

The amount of the support is 60% of total gross wages paid in August, September, and October 2020. The maximum amount of support available for one company is €100,000 and the maximum amount for "connected companies" can not exceed €1,800,000.

01 January 2021

From January to May 2021, the grant is available to companies whose decline in turnover (when calculating the decline in turnover takes into account the turnover from economic activity) in the relevant month meets one of the following criteria:

  • during the month of the support period the turnover of the company has decreased by at least 20% compared to the average turnover in August, September and October 2020 together, and for which the turnover in the month of the support period has decreased by at least 30% compared to the turnover in 2019 or 2020 per month.
  • registered with the SRS as a taxpayer after 1 January 2020 and for which the turnover in the month of the support period has decreased by at least 20%, compared to the average turnover in August, September and October 2020 together
  • has started economic activity after 1 January 2019 and for which the turnover in the month of the support period has decreased by at least 20%, compared to the average turnover in August, September and October 2020 together
  • in the month of the support period, the turnover of the company has decreased by at least 30% compared to the corresponding calendar month of 2019, and whose turnover has exceeded 10% of the turnover of the corresponding calendar month of 2019 for at least three months since 1 April 2020.

In 2021 the amount of the grant is 60% (for June 2021- 30%) of the company's gross salary and the total amount of the employer's mandatory state social insurance contributions, for which salary taxes were paid in August, September and October 2020. The maximum support available to one company is €100,000 (€50,000 in June 2021). The allocated budget for this measure from the State is €533.8 million.

Use of measure

On 14 January 2020, a total of 2,400 business applications have been received for a total amount of €18 million, a total of €1.1 million have been paid. "It is expected to be a geometric progression in pay out and by the end of the month, all companies who have applied by 15 January 2020 will be paid the support, if they are eligible," the Minister of Finance said.

Up to 13 April 2021 €173,317,670 has been paid out following 15,130 applications. The three most supported sectors are NACE G (wholesale and retail trade, repair of motor vehicles and motorcycles) where 1,886 applicants received €39 million, NACE I sector (Accommodation and food service activities) where 906 applicants received €30 million, and NACE C (manufacturing) where 689 applicants received €22 million.

Up to 18 July 2021 €470,637,389 has been paid out following 36,747 applications. The three most supported sectors are NACE G (wholesale and retail trade, repair of motor vehicles and motorcycles) where 2,746 applicants received €99 million, NACE I sector (Accommodation and food service activities) where 1,134 applicants received €78 million, NACE C (manufacturing) where 1,183 applicants received €66 million, and NACE F (Construction) where 1,197 applicants received €69 million.

Up to 7 September 2021 pay out reached €501.3 million.

Target groups

Workers Businesses Citizens
Does not apply to workers Applies to all businesses Does not apply to citizens

Actors and funding

Actors Funding
National government
National funds

Social partners

Social partners' role in designing the measure and form of involvement:

Trade unions Employers' organisations
Role Consulted Consulted
Form Direct consultation outside a formal body Direct consultation outside a formal body

Social partners' role in the implementation, monitoring and assessment phase:

  • Unknown
  • Main level of involvement: Peak or cross-sectoral level

Involvement

Peak level social partners’ organisations normally are informed on Government decisions. Regarding COVID-19 measures social partners participate in working groups and depending on their capacities are involved in consultations and negotiations.

Views and reactions

In the first version of the measure the eligibility criteria included only a decrease of turnover by 20% if compared to summer months.

On 8 December 2020, the criteria were changed: a decrease of turnover by 20% if compared to August, September and October 2020, and a decrease of turnover by 30% if compared to respective month in 2019.

The Latvian Employers confederation (LDDK) criticized this decision. The proposal of LDDK was that only one criteria needs to be met.

On 13 January 2021 LDDK pointed out that support for business has improved, however, it is still necessary to improve the criteria for receiving it.

Sources

  • 10 December 2020: The Latvian Employers Confederation criticizes the government's decision on the criteria for receiving a working capital subsidy (www.lsm.lv)
  • 18 December 2020: Regulations Nr. 676 On support to companies affected by the COVID-19 crisis to ensure the flow of working capital (likumi.lv)
  • 18 December 2020: Grant for working capital flow avalable for companies (www.vid.gov.lv)
  • 13 January 2021: Support for business has improved, however, it is necessary to improve the criteria for receiving it, LDDK points out (www.delfi.lv)
  • 14 January 2021: The pay out to companies of working capital grant is gaining momentum, says Reirs (www.delfi.lv)
  • 14 January 2021: Ministry of Economics: Significantly expands support for merchants' working capital (www.vid.gov.lv)
  • 28 January 2021: Amendments to the Regulations of the Cabinet of Ministers of 10 November 2020 No. 676 (28 January) (likumi.lv)
  • 04 February 2021: Amendments to the Regulations of the Cabinet of Ministers of 10 November 2020 No. 676 (4 February) (likumi.lv)
  • 18 February 2021: Amendments to the Regulations of the Cabinet of Ministers of 10 November 2020 No. 676 (18 February) (likumi.lv)
  • 14 April 2021: Information from State Revenue service on use of support (www.vid.gov.lv)
  • 27 July 2021: Statistics on support from the State Revenue Service (www.vid.gov.lv)
  • 15 September 2021: State Revenue service statistics 15 September 2021 (www.vid.gov.lv)

Citation

Eurofound (2021), Grant for working capital flow, measure LV-2020-45/1716 (measures in Latvia), EU PolicyWatch, Dublin, https://static.eurofound.europa.eu/covid19db/cases/LV-2020-45_1716.html

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