Latest news, advice & recommendations on coronavirus.

15 May 2020

Public support measures to line up the consequences of the lockdown - Which bridges lead across the financial gaps.

The Covid-19-induced lockdown is putting the economy under severe strain. Public life is brought to a near standstill - with massive implications for society and the workplace.

Government decision-makers are faced with the difficult task of finding the right balance and the right measure, on the one hand to protect the health of their citizens as best as possible, and on the other hand to ensure that the domestic economy is not unnecessarily damaged, mass layoffs and a flood of company insolvencies are prevented, citizens’ fundamental rights are not disproportionately curtailed, and social life does not suffer beyond a reasonable level.

In this hour, more than ever, people need companions to help them cope with the crisis.

To help you find your way, we have compiled a selection of relevant public measures that have been adopted by the federal and state governments to provide support in the “Corona crisis”. These are presented below:

  1. tax measures for companies to safeguard liquidity
  2. emergency aid for companies from the federal and state governments
  3. suspension of the obligation to file for insolvency
  4. easier access to basic benefits/unemployment benefit II
  5. subsidies from banks
  6. lease agreements
  7. loan agreements


1. Tax measures for companies to secure liquidity.

Taxes are an important approach. In the crisis it is necessary to secure the necessary liquidity. In order to improve liquidity at companies, the possibilities for deferral of tax payments, reduction of advance payments and in the area of enforcement are extended with validity until December 31, 2020 as follows:

  • The granting of deferments is facilitated. Tax authorities may defer taxes if collection would cause substantial hardship. The tax authorities are instructed not to impose strict requirements in this regard. This will support the liquidity of taxpayers by delaying the timing of tax payments. Overall, companies will be granted the possibility of tax deferrals in the billions.
  • Advance payments can be adjusted more easily. As soon as it becomes clear that taxpayers’ income is likely to be lower in the current year, advance tax payments will be uncomplicatedly and quickly reduced. This improves the liquidity situation. Special advance sales tax payments can be waived for companies in crisis.
  • Enforcement measures** (e.g. account garnishments), delinquency surcharges or late payment penalties will be waived until December 31, 2020, as long as the debtor of a due tax payment is directly affected by the impact of the Corona virus.

You can initiate these measures directly with the responsible tax office or with your tax advisor.

According to the BMF letter of April 23, 2020, the deadlines for employers to submit monthly or quarterly wage tax returns during the Corona crisis can be extended in individual cases upon request pursuant to § 109 paragraph 1 AO. The prerequisite is proof that the wage tax returns cannot be submitted on time through no fault of the employer. The extension of the deadline may not exceed two months.

Individual federal states had already previously increased the “Steuerliche MaßMaßnahmen “:

For example, employers in North Rhine-Westphalia can apply for a two-month extension of the deadline for the income tax return to be submitted on April 10, 2020.


2. Federal and state emergency aid for companies.

“Federal emergency aid “

The so-called Federal Emergency Aid for micro-enterprises from all sectors of the economy and solo self-employed persons as well as members of the liberal professions serves as a short-term grant to secure liquidity: the federal government provides a total of up to 50 billion euros for this purpose.

Federal emergency aid

The Emergency Aid consists of a non-repayable grant to secure the economic existence of the applicants and to create bridges over the financial gaps caused in particular by ongoing operating costs. 

The Emergency Aid provides for the following one-time payments for companies:

  • Companies with up to five employees will receive a one-time grant of up to €9,000 for 3 months and.
  • Companies with up to ten employees receive a one-time grant of up to €15,000 for 3 months.

The prerequisite with regard to the granting of this subsidy is significant financing bottlenecks and economic difficulties as a result of the “Corona crisis”.

Individual federal states have increased the “emergency aid from the federal government “ or expanded the group of recipients:

For example, the state government of North Rhine-Westphalia has expanded the eligible companies to include the group of companies with up to 50 employees. These receive a one-off grant of up to €25,000 for three months.

In addition, the state of NRW creates bridges for solo self-employed and freelance artists over the financial gaps with regard to living expenses:

All solo self-employed artists are required to submit a declaration at the end of the three-month grant period. In this they state whether they have required the NRW emergency aid in full to cover the liquidity shortfall that has arisen. If not, they must repay any excess aid received. The current regulation stipulates that they can set aside €2,000 for living expenses when providing this proof.

The prerequisite is that the applicants have neither applied for ALG II in March nor in April, nor have they received support from the Ministry of Culture and Science’s Emergency Program for Artists (MKW Program).

Eligible freelance artists who have already applied for emergency assistance but have so far not been successful due to the funding limit of five million euros will receive a financial subsidy for their living expenses in the amount of €2,000 for the months of March and April, subject to proof of their artistic activity (membership in Künstlersozialkasse or other artists’ association). The support was extended by additional funds in the amount of 27 million.

The prerequisite is that they have not received any benefits from the MKW program, the NRW Emergency Aid 2020 or the basic income support in March and April. Support for those applicants whose applications have already been approved will also be increased to a flat rate of €2,000 for living expenses.

Note: Incorrect and incomplete information may be punishable under § 264 StGB as subsidy fraud.

Free consultation

Freelancers and small and medium-sized enterprises affected by the Corona crisis can take advantage of consulting services up to €4,000 free of charge. The contracted consultant receives the subsidy directly from the state.

Support for start-ups

The federal government is providing a €2 billion aid package specifically for start-ups to supplement existing measures and facilitate access to financing. **Short-time allowance

In addition to this emergency aid, it may be necessary to reduce your company’s expenses by taking further measures. The starting point is personnel expenses, in particular through the possibility of applying for short-time work. This makes it easier to adjust personnel capacity, and thus also personnel spending, to current requirements. Companies receive financial support. At the same time, however, it is of great importance to offer employees a perspective “for the time after” and to refrain from dismissals.

The conditions for access to short-time allowance have been modified and reduced retroactively to March 1, 2020, these include in particular:

  • Reduction of the quorum of employees affected by work loss in the company to up to 10%.
  • Short-time allowance also for temporary workers
  • full reimbursement of social security contributions by the German Federal Employment Agency (BA)
  • no need to build up negative working time accounts in companies where agreements on fluctuations in working time are used.

Short-time allowance can be granted for a period of up to twelve months. It amounts to 60% of the difference between the flat-rate net pay that would have been paid if no work had been lost and the flat-rate net pay from the pay actually received. If at least one child lives in the household, the percentage increases to 67%.

On May 14, 2020, the German Bundestag approved an increase in short-time allowance for those who receive short-time allowance for their working hours reduced by at least 50%, as follows:

  • from the fourth month of receipt to 70% (or 77% for households with children).
  • from the seventh month of receipt to 80% (or 87% for households with children)

of the flat-rate net remuneration, until December 31, 2020 at the latest.

In addition, there will be an expansion of additional earnings opportunities for short-time workers: as of May 1, 2020, they will be allowed to earn additional income in all occupations up to the full amount of their previous monthly income. The restriction to system-relevant occupations will be lifted. This regulation will also apply until December 31, 2020. The Bundestag and Bundesrat still have to signal their approval of the bill.

Top-up payments to short-time allowance made by companies between March 1, 2020 and December 31, 2020 will remain tax-free. The prerequisite is that the top-up amount and short-time allowance together do not exceed 80% of the lost pay. If more is paid, the portion in excess must be taxed.

Continuation of wage payment for childcare.

In view of the current situation, the period during which employees may be absent from work to care for their children without loss of pay has been extended to at least one week. In order to ensure that care is also provided afterwards, there may be flexible options for the allocation of working hours, which must be agreed with the employer. The Infection Protection Act includes a claim for compensation for loss of earnings in the event of official closure of schools and daycare centers. The amount of compensation is 67% of net income for up to six weeks, limited to a maximum monthly amount of €2,016. The scheme does not apply during vacation periods and is limited until December 31, 2020.

Special payments

Employers may pay out aid and support to their employees up to an amount of €1\,500 tax-free or grant them benefits in kind. These allowances and benefits are also exempt from social security contributions.

The requirements are:

  • Granting of the special benefits to the employees:
    - in addition to the wages due anyway
    - between March 1, 2020 and December 31, 2020.
  • Recording in the employees’ payroll account.

Simplifications for benefit records.

For all special accounts set up by domestic legal entities under public law, domestic public service agencies or by an officially recognized domestic association of independent charities including its member organizations to help those affected by the Corona crisis, the simplified proof of benefits will be permitted. Accordingly, the cash deposit receipt or the booking confirmation of a credit institution (account statement, direct debit receipt or PC printout in the case of online banking) is sufficient as proof.

Facilitation of deferral of social security and employers’ liability insurance association contributions.

Claims to the total social insurance contribution can be deferred if immediate collection would cause significant hardship for the company. However, the right to receive the total social insurance contribution must not be jeopardized. After an application for deferral has been made, the health insurance fund decides whether to grant the deferral at its own discretion. According to the German National Association of Statutory Health Insurance Funds, deferrals are possible for contributions for the months of March to May 2020 and may be granted until the due date for contributions for the month of June 2020 at the latest.

Trade associations also offer companies facilitated deferral options.

Deferrals in accordance with the Infection Protection Act.

A special case of non-refundable assistance is provided by § 56 of the Infection Protection Act. If your employees are unable to work due to quarantine obligations, you as an employer can apply for compensation for loss of earnings on behalf of your employees or as a self-employed person. For this purpose, you must submit an application to the competent authority in your federal state no later than three months after the cessation of activities or the end of the quarantine.


3. Suspension of the insolvency application requirement.

As part of the legislative package, the insolvency filing obligation has been suspended until September 30, 2020. This means that you can continue your business for the time being even in a situation in which you would already have had to file for insolvency under the previous law. The prerequisite here is also that the insolvency maturity is attributable to the “Corona crisis” and that there are reasonable prospects of restructuring. This is presumed in particular if your company is currently insolvent, but this insolvency did not exist as of December 31, 2019. In addition, there must be a positive going concern forecast.


4. Easier access to basic security / unemployment benefit II.

The application for Grundsicherung at the Employment Agency can now also be filed by self-employed persons if they do not have sufficient means to support themselves and their family. As part of the Corona package of measures, access to basic benefits has been made easier. As part of this so-called social protection package, special rules apply to freelancers, solo self-employed or small entrepreneurs who are economically burdened by the loss of a large part of their orders due to the Corona crisis: Anyone who applies for basic benefits between March 1 and June 30, 2020, only has to provide detailed evidence of their assets if they (or, to be precise, the “community of need,” including, for example, their spouse and children) have “substantial assets.” In addition, you may leave your savings untouched during the first six months in which you receive benefits if you do not exceed the maximum limit for “substantial assets”.

The eligibility period for ALG I will be extended by three months for those who were already seeking work and receiving ALG under the Third Book of the Social Code (SGB III) prior to the Corona crisis and whose entitlement to ALG I would end between May 1, 2020 and December 31, 2020.


5. Subsidies through banks.

Various public financing funds are available to companies to create bridges across the financial gaps. In view of the crisis, for example, the state development bank KfW has launched the Special Program 2020, whose funds are basically unlimited. Companies of all sizes that are experiencing or have already experienced temporary financing difficulties as a result of the crisis can apply for financial support. This special program can be used to finance both working capital and investments. Applications for this program can already be submitted through the house bank since March 23, 2020.

Another form of government support is default guarantees. With these guarantees, guarantee banks assume a large part of the default risk (up to 80% for working capital and up to 90% for investments) if another bank grants a loan. The aim is to make loans via the principal bank more accessible, especially for small and medium-sized enterprises (SMEs) and freelancers.

In the wake of the “Corona crisis”, the guarantee banks are increasing the guarantee ceiling from 1.25 million euros to 2.5 million euros. Guarantee banks can also make guarantee decisions independently and within three days for amounts up to €250,000.

The federal government provides export credit guarantees, known as Hermes guarantees. The background to this is to protect companies against payment risks in foreign business.

Small and medium-sized enterprises have recently been given the opportunity to apply for the KfW Quick Loan 2020 until the end of this year. This is aimed at companies that:

  • employ more than ten people,
  • have been on the market since at least January 2019, and
  • have made a profit in the sum of the years 2017 to 2019 or in 2019 - for companies that have been on the market for a shorter period, this period will be used.

Companies that were already in difficulty as of December 31, 2019, have disorderly economic conditions as of December 31, 2019, and those that make distributions of profits or dividends during the loan period are not eligible.

This quick loan can be used to finance investments and current expenses.

The loan amount is:

  • a maximum of 500,000€ per group of companies with more than 10 employees up to
  • including 50 employees.
  • a maximum of €800,000 per group of companies with more than 50 employees.

Limited to a maximum of up to 25% of the annual turnover in 2019.

KfW assumes 100% of the loan default risk from the bank. The interest rate is currently 3%. Loan approval is without further credit risk assessment to allow for quick approval.


6. Leases


Because of the “Corona Crisis”, the legislature has restricted your landlord’s right to terminate your lease over a limited period of time. The following applies to residential leases, as well as commercial leases or rental agreements: The landlord may not terminate the lease because of rent owed from April 1 to June 30, 2020. Prerequisite is that you can credibly prove that you cannot pay the rent due to the current situation. However, this does not relieve you of the obligation to pay this rent debt after June 30, 2020 until June 30, 2022 at the latest.


These restrictions on termination rights have implications for landlords who have borrowed with respect to their properties. The lack of rental income in the coming months could mean that these borrowers will no longer be able to service the loans they have taken out as agreed. This affects not only owner-occupiers but also capital investors.

In such cases, borrowers are given the opportunity to agree a suspension of repayment with their bank for the period from April 1 until September 30, 2020 for the time being.

In such cases, the bank will waive interest and repayments as well as the assessment of additional interest or default interest for the time being until September 30, 2020. Furthermore, the Bank will not issue any notices of termination due to late payment. Alternatively, the bank may offer its customers better terms for the aforementioned period, for example in the form of lower repayment installments, or debt rescheduling.

Overall, the banks’ concessions result in a term extension of the existing loans. The original end of the term of the loans is shifted backwards in time by the monthly installments currently suspended.

Under certain circumstances, the suspension of repayments for borrowers may be extended to the end of July 2021 if the “Corona crisis” has a longer impact than currently feared.


7. Loan Agreements.

For loan contracts, a deferral provision has been adopted in the Civil, Bankruptcy and Criminal Procedure Law Mitigation Act for the consequences of the COVID-19 pandemic. For consumer loan contracts entered into before March 15, 2020, lender claims for repayment, interest, or principal due between April 1, 2020 and June 30, 2020 are deferred. This deferral shall initially apply for three months after the respective due date.

To qualify for the deferment, the consumer must be burdened by a loss of income as a result of COVID-19 and be unable to provide a reasonable living if the loan is serviced in a timely manner.

Business loan agreements for commercial purposes are currently exempt from this provision. However, it may be possible to supplement this regulation in the short term, in particular to include loan agreements of microentrepreneurs. The federal government already has the legal authorization to do so.

We hope that we have provided you with an overview of current liquidity protection measures by the federal and state governments. Please contact us if you have any further questions.