New arrangement for arrears to the state

The Finance Ministry is drafting a plan for taxpayers to repay the debts that have accumulated during the pandemic so that enterprises and freelance professionals can start looking ahead again.

The debts to the state that have been suspended for now exceed 3 billion euros, while the pool of expired dues has grown by about €5 billion since the start of the year.

Sources say that the ministry is considering a “special purpose” arrangement that will concern all taxpayers’ debts that remain without a settlement plan by April 2021.

This means that the new framework for payments in installments will concern all state debtors and not just those who have suffered as a result of the pandemic.

Thousands of enterprises and freelancers who will want to get back to normal once the health crisis is over will be faced with old arrears from the first lockdown, obligations from the current lockdown, the dues of that time and the end of the bank tranche moratorium. This is highly likely to create new expired debts to the state and social security funds, as well as new bad loans in banks’ portfolios.

The number of monthly installments in that new arrangement could reach up to 120, with the aim of coming up with a monthly tranche that will not scare debtors away.

The interest rate will be determined according to the number of tranches debtors pick: Those who opt for 12 tranches will pay no interest, 24 tranches will bear an interest of 2.5%, and any payment scheme with more installments will have a higher interest rate.

However, in order to choose a high number of installments, debtors must also fulfill the ministry’s criteria. Sources explain that in order to join a program with more than 24 installments, debtors will not only have to meet income and property criteria, but it is possible that each company or professional’s annual rate of turnover decline will also constitute a criterion of eligibility.

In any case, the final decision on that will be made toward the end of the year’s first quarter, provided no new suspension of tax obligations has been decided up until then. As things stand, if the new arrangement secures the approval of the country’s creditors, it could start applying from May.