Measures of state support for hotel industry in Russia

On May 19, 2020, tax, financial, and legal experts from SCHNEIDER GROUP (Ekaterina Lakatosh, Angelina Anokhina, and Ksenia Dikopolskaya) participated in the Hotels and Tourism Committee of the Association of European Businesses (AEB).

They delivered a thorough and detailed presentation on support measures provided to members of the hotel industry by the Russian government (both at the federal and regional levels). These measures include tax measures, subsidies, loans, and others, including the right to postpone payment of rent or demand its decrease from the landlord.

Unfortunately, the range of measures available to the hotel industry is not so large. This is because hotels can be rarely classified as small and medium-sized enterprises (SMEs), either due to having majority foreign shareholders / participants or revenue exceeding the established thresholds.

However, hotels are included in the list of the most affected industries (established by the Order of the RF Government No. 434 of April 03, 2020), which makes them eligible for certain measures aimed to help industries heavily affected by the pandemic.

We consider the main measures of state support for the hotel industry to be as follows:

• interest-free payroll loans (federal support measure for the most affected industries) – the rate is established at 0% for the first 6 months, for the next 6 months the rate is the key rate of the Bank of Russia, minus 2 pp (currently 3.5%). The maximum amount is calculated by the following formula: the number of employees (based on employment contracts) X minimum wage X for 6 months. To receive such a loan, the employer must keep at least 90% of its employees.
• deferral of payment of taxes / payment of taxes in installments (federal support measure for the most affected industries) – the rules apply to taxes, advance payments on taxes, and social contributions which are due in 2020 (except for excise taxes and mineral extraction tax). A company may receive deferral or tax payments by installment if it has at least one of the following indicators:
  • a decline in income of more than 10%
  • a decrease in income from the sale of goods (work, services) of more than 10%
  • a decrease in income from the sale of goods (work, services) under operations subject to value added tax at the rate of 0 per cent of more than 10%
  • receiving a loss according to corporate income tax returns for the reporting period of 2020, provided that there was no loss for 2019.

• deferral of paying rent under lease agreements (federal support measure for the most affected industries) – applicable to the full amount of rent for the period of validity of the high readiness regime or emergency situation and 50% of rent between the date of termination of the high readiness regime or emergency situation and October 1, 2020. Rent arrears are to be paid not earlier than January 1, 2021 and not later than January 1, 2023.

• state grants to owners of immovable property in Moscow (Moscow support measure for trade objects, catering facilities, consumer services objects and hotels) – provided for payment of property and land tax to the landlords, which reduced lease payments for their tenants. For all hotel lease (sublease) agreements with lessees (sublessees) directly operating in the hotel concluded before April 1, 2020, the lease payments had to be reduced:
  • for the period of at least the second quarter of 2020
  • in the amount not less than twice the amount of property tax and land tax (land lease fee) related to the leased area and not less than 50% of the previously effective amount of rent payments under the lease agreement.

Additional criteria are also established for immovable property and companies receiving grants (including the obligation not to have participants registered in off-shore jurisdictions possessing more than 49% share in the charter capital).