Royal Decree Law 7/2020: Urgent socio-economic measures to respond to the economic impact of COVID-19

Written on 16 Mar 2020

Royal Decree Law 7/2020, of 12 March, adopting urgent measures to respond to the economic impact of COVID-19 represents the first stage of economic measures that seek to mitigate the serious socio-economic damage that COVID-19 is causing. Up to 18,225 million euros have been allocated to the following areas: the health system, families, the tourism sector, the self-employed and SMEs, and public administrations.

On 13 March 2020, Royal Decree Law 7/2020 of 12 March came into force, adopting urgent measures to respond to the economic impact of COVID-19 (the “RD-Law”). This would be a first set of actions of a socio-economic nature as a continuation of the measures established in the recent Royal Decree-Law 6/2020, of 10 March, adopting certain urgent measures in the economic field and for the protection of public health. It provides, among other things, for the recognition of periods of isolation or infection of workers – whether employed or self-employed – as a consequence of COVID-19 as a situation assimilated to an accident at work, for the purposes of the economic benefit for temporary incapacity of the Social Security system.

The most relevant economic measures adopted by the Spanish government to mitigate the unfavourable effects that the Spanish economy is suffering as a result of the COVID-19 pandemic are detailed below. This RD-Law contains measures of a tax nature, financial support, reinforcement of the public health system, liquidity guarantees for companies in the tourism sector and efficient management of public administrations.

A. Healthcare System

With regard to the measures introduced by the RD-Law to provide the Spanish health system – which is the responsibility of the Autonomous Communities – with more economic resources, the following should be highlighted:

  • Granting of an extraordinary credit to the Ministry of Health for a total amount of 1,000 million euros, charged to the Contingency Fund (Fondo de Contingencia).
  • Updating of the amount of the supplies on account of the Autonomous Communities for the collection of personal income tax, VAT and certain excise duties (alcohol and derived beverages, beer, intermediate products, hydrocarbons, tobacco products and electricity).

It should also be noted that the RD-Law allows the government to intervene on the prices of certain medicines and health products that are not subject to medical prescription. Thus, the Interministerial Commission on the Price of Medicines (Comisión Interministerial de Precios de los Medicamentos) could set maximum prices for the sale of these medicines and products to the public.

B. Families

For the group of vulnerable families in the RD-Law, the following actions have been taken, in particular:

  • A system of school dinner bursaries, through the granting of economic aid or food distribution, to try to guarantee access to food for children in vulnerable situations. The families benefiting from this aid are those with children belonging to the system of infant education, primary education and compulsory secondary education whose Autonomous Communities have granted bursaries or aid for the school dinners during the 2019-2020 academic year.
  • Extension of the recognition of periods of isolation or contagion by the COVID-19 as situations assimilated to accidents at work for the purposes of the economic benefit for temporary incapacity of the Social Security system to personnel included in the special regimes for civil servants.

C. Tourism sector

As for the businesses and self-employed who carry out tourism-related activities, which are being seriously damaged by the pandemic, this has been provided for through the RD-Law:

  • To strengthen the line of financing managed by the Instituto de Crédito Oficial (ICO), which was created by Royal Decree-Law 12/2019 of 11 October, adopting urgent measures to alleviate the effects of the opening of insolvency proceedings of the Thomas Cook group of companies.

Thus, this line of financing is extended, with an additional EUR 200 million to the EUR 200 million initially planned, to also cover companies and self-employed workers in the Spanish tourism sector (e.g. hotel activities, car and vehicle rental, taxi transport, restaurants, cultural, recreational and entertainment activities, amusement parks.

  • Reduction, from 1 January 2020 to 31 December 2020, of 50% of the business contributions to Social Security for common contingencies, as well as for the concepts of joint collection of unemployment, FOGASA and vocational training, for companies in the tourism sector that generate productive activity in the months of February, March, April, May and June and that start or maintain in employment during those months of workers with discontinuous permanent contracts.

D. Self-employed and SMEs

This group, which is particularly sensitive and significant in Spain, is currently undergoing major challenges, which is why the RD-Law provides for the following actions:

  • Possibility of deferment of certain tax debts for taxpayers with a volume of transactions not exceeding 6,010,121.04 euros in 2019, provided that the debt does not exceed 30,000 euros and is within the jurisdiction of the State tax administration. Likewise, it has been foreseen that no default interest will accrue during the first three months.
  • Financial support to promote the liquidity of the self-employed and SMEs, by deferring the repayment of loans received through the General Secretariat of Industry and Small and Medium Enterprises.

E. Public administrations

Finally, through the RD-Law, measures are also adopted to promote efficient management by public administrations through:

  • Possibility for the General State Administration to resort to emergency procedure (under the terms of article 120 of Law 9/2017, of 8 November, on Public Sector Contracts, which transposes to the Spanish legal system the Directives of the European Parliament and the Council 2014/23/EU and 2014/24/EU, of 26 February 2014) for the procurement of goods or services needed to address the COVID-19 crisis.
  • Possibility that the Ministry of Finance makes credit transfers between different budget sections to strengthen the financing of health policy by the State.

The measures established in the RD-Law came into force on 13 March 2020, the date on which it was published in the BOE, and it is planned that it will remain in force as long as the Spanish government considers that the extraordinary circumstances that led to its approval persist.