Germany’s government has moved swiftly and decisively to confront the potentially devastating effects of the coronavirus pandemic on the economy.
The country’s economy is in a strong position to introduce measures supporting the economy over a prolonged period. By providing businesses with sufficient liquidity, the government measures will help ensure that enterprises emerge from the crisis intact.
The Ministry of Finance and Federal Ministry for Economic Affairs and Energy have unveiled a joint assistance program and tax policy measures totaling billions of euros. The package of measures and instruments has been put in place to protect the employment market and enterprises of all sizes in all sectors.
Liquidity Aid Loan Programs
The federal development bank KfW has expanded and eased access and terms on two existing loan programs:
- the ERP-Universal Start-up Loan
- the KfW-Entrepreneur Loan
KfW has also introduced a new KfW Special Programme. This programme includes generous terms and conditions on consortial financing for larger projects, as well as emergency liquidity aid for micro-enterprises and freelancers/self-employed persons experiencing financial difficulties caused by the corona crisis.
Please refer to the KfW website for details on loan program conditions. Applications for all these can be made through high-street banks.
At the same time, both federal and state governments are setting up a variety of aid programs to support companies in Germany. The range of services is continuously being updated and expanded. The Federal Ministry for Economic Affairs and Energy provides an overview of all state programs (so far in German only). If you have any questions, please do not hesitate to contact us.
More Flexible Rules for Short-Time Allowance Schemes
The Federal Employment Agency pays the short-time allowance as partial compensation for a loss of earnings caused by a temporary cut in working hours. This reduces the costs faced by employers in the context of employing workers, and enables companies to continue to employ their workforce even in the event of a loss of orders. In other words, short-time allowances help to prevent dismissals.
Currently short-time allowances schemes can be granted on a more flexible basis for a limited period until December 31, 2020. For instance, companies are eligible to apply, if 10 percent of the employees are effected by shorter working hours. Moreover, social security contributions which have to be paid solely by employers for employees working short-time are reimbursed in full.
Tax Policy Measures
Tax measures improving companies’ liquidity situations have been decided. For instance, options for deferring tax payments and reducing prepayments will be enhanced. Enforcement rules will also be adapted - there will be no foreclosures or late payment fines, if the debtor of a pending tax payment is directly affected by the coronavirus.