The Government of Montenegro adopted two sets of measures in order to mitigate the adverse effects of COVID-19 epidemic on the economy, as well as on the most vulnerable categories of citizens. The first package involves a set of emergency measures mostly aimed at limiting the budget spending and redirecting public resources towards the fight against coronavirus, with additional measures aimed at helping the private sector. The second package contains specific direct financial aid and fiscal incentives for the private sector and employees. In addition to that, the Council of the Central Bank of Montenegro (“Central Bank“) previously adopted a decision on temporary measures for mitigation of negative effects of the new coronavirus on the financial system.
Moratorium on loan/financial leasing repayments
The Central Bank approved an opt-in 90-day moratorium on loan and financial leasing repayments. The moratorium applies to banks, as well as leasing providers and microcredit institutions, including the Investment and Development Fund (IRF). The moratorium encompasses both retail and corporate borrowers and all loan-related payments – capital amount of the loan, interest, default interest, and fees. The Central Bank announced that already in the first 20 days from the start of application of this measure (until 10 April 2020) a total number of 64,434 borrowers applied for moratorium, which amounts to 52% of all borrowers who are natural persons and almost 74% of businesses. Therefore, the moratorium was enforced on 46% of the total number of loans in the banking system in the amount of EUR 1.31 billion.
Borrowers submit their notices accepting the moratorium via email or in writing, and banks are obliged to apply the moratorium within five days from the notice. The borrower must also inform their employer of the moratorium, and the employers must cease any payments related to loan repayment within five days from the notice. Borrowers may apply for the moratorium at any time until this decision is in force, i.e. until the Central Bank adopts a decision on termination of the measure.
During the moratorium, banks may not calculate default interest on due loan payments, initiate enforcement proceedings, undertake any other measure to collect the payments, or downgrade the loan. Interest accruing during the moratorium will be capitalized. Repayment period of the loan will be extended for the duration of the moratorium and banks will provide the borrowers with the new repayment plans, without having to sign annexes to the loan agreements.
Moratorium on taxes and customs duties
The Government approved a 90-day moratorium, at the request of a taxpayer, on payment of personal income tax, salary contributions, and tax obligations under reprogram. Moratorium is available to private sector companies or state-owned companies operating on market principles, as well as entrepreneurs, who are unable to settle their tax obligations due to negative effects of the coronavirus epidemic on their business activity. Taxpayers with digital certificate may apply for moratorium through ePortal, or otherwise through email or mail, and they do not need to prove the negative effects of the epidemic on their business activity.
The Government also approved an interest-free 60-day moratorium on customs debt and VAT on imports due in April and May for debtors ordered to shut-down their operations due to COVID19 epidemics, against a bank guarantee. The Tax Administration will process VAT refunds within 45 days instead of statutory 60 days.
Moratorium on rent payments to the state as lessor
State institutions who are lessors of state property have been approving a 90-day moratorium on rent payment to all lessees, starting from 1 April 2020.
Advance payments to contractors on capital projects
The Government has tasked the Public Works Administration and Transport Administration to provide advance payments at the request of contractors engaged on capital investment projects against bank guarantee. The aim of this measure is to ensure liquidity of contractors and to maintain continuity of the implementation of public works.
Subsidies for employment in the private sector
The Government approved subsidies aimed at preserving and creating new jobs in the private sector companies which have been affected by the Government measures to tackle the epidemic. Eligible businesses are entrepreneurs, micro, small and medium-sized enterprises which do not have outstanding tax liabilities for 2019 or are under a tax reprogram, and have not been in breach of any state measures to combat the epidemic. There are six categories of subsidies:
- Subsidies for businesses that are shut-down as a result of state measures are entitled to 100% of gross minimum wage for April and May 2020 for all employees who have been on their payroll at least since February 2020.
- Subsidies for businesses in the tourism sector that were not shut down, but their business activity has been significantly reduced as a result of state measures, are entitled to 100% of gross minimum wage for April and May 2020 for all employees who have been on their payroll at least since February 2020. The Government published a list of eligible business activities.
- Businesses from jeopardised industries are entitled to 50% of one-month gross minimum wage for each employee who has been on the payroll at least since February 2020. Eligible industries are those that were not shut down, but their business activity has been significantly reduced as a result of state measures, as per the list published by the Government.
- Businesses which will have not cut their number of employees compared to February 2020 and have or will have employed new people over a period of six months starting from 1 April 2020 are entitled to 70% of gross minimum wage for each new employee for a period of six months. The new employees must be from among the ranks of unemployed in the month before the submission of the request. The subsidies will be paid over a period of six months, provided that the employer commits to keep them at least for a period of 12 months. This measure does not apply to the companies in the sectors of finance, insurance, electricity and gas supply, telecommunications, water supply, wastewater management, waste management, to state and local institutions nor companies with majority state or local self-government ownership. The employers who lay-off one or more new employees with subsidised salary and this results in them having a lower number of employees compared to the previous month will be obliged to repay the subsidies for the decreased number of employees.
- Businesses whose employees are using the right to paid leave to take care of a child under 11 years of age due to the closure of kindergartens and schools are entitled to 70% of gross minimum wage for employees who have been on their payroll at least since February 2020. Salaries will be subsidised during the entire period of the leave. The measure does not apply to state and local institutions or companies with majority state or local self-government ownership.
- Businesses whose employees have been in quarantine or self-isolation are entitled to 70% of their gross minimum wage for employees who have been on the payroll at least since February 2020. The measure does not apply to state and local self-government institutions. The subsidy is available for one month per employee, April or May, depending on the predominant timing of the quarantine.
Businesses will submit requests for subsidies by 15th day of each month for the previous month through a new electronic service implemented on the Portal of the Tax Administration of Montenegro (ePrijava), which entities use regularly for tax submissions. This platform will contain a front-end application though which the applicant will be authenticated, provided a listing of registered employees for February 2020, and enabled to upload the necessary documents for certain measures. The applicants will be able to see right away if they satisfy the conditions under relevant measures and if their applications are incomplete or rejected, with the instructions for submission of additional documents and/or reapplying. The back-end application will carry out automatic processing of requests, with verification of only those documents for which automatic processing is not possible by a specially designated team.
Direct aid though the IRF
IRF designed a new credit line intended to improve the liquidity of entrepreneurs, micro, small, medium-sized and large enterprises. up to a maximum amount of EUR 3 million per beneficiary. Loans will be granted through a simplified procedure, without approval fee, and at the interest rate of 1.5%. Priority will be given to loans for procurement of medicines, medical equipment and vehicles. The next priority will be businesses operating in the sector of food and hygiene products production, processing and procurement, followed by entrepreneurs, micro and small enterprises, such as hospitality businesses and crafts, taxi companies, small transport companies, small clothing stores, hairdressers, private kindergartens, small shops, and other entrepreneurs who were forced to shut down due to Government measures. They will obtain liquidity loans for payment of salaries to their employees for three months, on the basis of the last paid net salary, which will be paid directly to the employees’ bank accounts.
The Government announced that the IRF will develop additional instruments for financial support to the economy, and IRF is expected to announce the details on these instruments in the coming weeks.
Relief by the Montenegrin state-owned electricity company (EPCG)
The national electricity company Elektroprivreda Crne Gore will exempt all entrepreneurs and companies in the tourism sector and sectors that were shut down due to COVID19 epidemic from payment of the fixed part of the electrical bill for the period from 1 April until 30 June 2020.
Also, within the scope of measures intended directly for citizens, Elektroprivreda Crne Gore will double the subsidies on electricity bill for existing subsidy recipients who receive social benefits.
Financial support for the media sector
The Government decided to financially support the media for their crucial role during the coronavirus epidemic. To that end, the Ministry of Culture has announced a public competition for allocation of EUR 150,000 for the creation and production of content in daily print media.
The Agency for Electronic Media has accepted the recommendation of the Government to exempt the electronic media from the mandatory fee payable to the Agency for the next three months. Also, at the recommendation of the Government, the Radio and TV Broadcasting Centre of Montenegro approved a 90-day moratorium on payments of obligations of local radio and TV broadcasters.
Support package for agriculture and fisheries
The Government designed a special comprehensive support package for agriculture and fisheries, which includes repurchase and storage of surplus products and subsidized loans of up to EUR 20.000, subsidised social security contributions for agricultural workers, financing of insurance premiums, and other measures in support of domestic agriculture and fisheries.
Financial aid to citizens
In addition to support measures for businesses, the Government will provide direct aid for certain vulnerable groups of citizens. Pensioners with the lowest pensions and beneficiaries of social material assistance will receive one-off financial aid in the amount of EUR 50 each. The Government allocated a total of EUR 1 million for this purpose.
Unemployed persons will receive one-off financial aid in the amount of EUR 50, while pensioners in agriculture sector will receive one-off in the amount of EUR 64 each.