Assistance in connection with the Corona crisis
Measures against the spread of the corona virus have a major impact on our daily life - also in Germany. At present, everyone is experiencing the consequences of government policies to contain the virus. Uncertain times, especially for entrepreneurs. Almost all of our clients are more or less affected by the corona virus.
By now the government has launched a broad package of emergency financial measures for companies. All of these developments are also following each other at a rapid pace: what was topical yesterday may already be outdated today.
So we can imagine that in these turbulent times, entrepreneurs are not able to see the forest for the trees and are confronted with many questions. This is why we have set up a corona information team at the MNT GRUPPE. A multidisciplinary team of professionals, each specialist in his own field, but with a common goal: to help our clients through this corona crisis. On this overview you will find information on each topic that will help you. Our team attempts to be up to date and to update this page on a regular basis.
Please refrain from direct contact with the specialists, as this would lead to an immediate overload of people. Kindly send your inquiries via the prepared links or contact your "normal" known consultants - together we will navigate you through the crisis.
Short-time compensation (KUG) – Status as of 02/10/2020
The corona crisis has brought many industries to a standstill. As a result, German companies are sending their employees on short-time work.
Short-time work can be introduced on very short notice in the event of loss of customer orders by means of appropriate agreements to reduce working hours in the company and notified to the local employment agency. Short-time work does not have to be introduced and notified for the entire company. Short-time working can also be restricted to individual company departments.
KUG is calculated on the basis of the net loss of remuneration. Short-time workers receive 60% of the lost flat-rate net remuneration. If there is at least one child living in the household, the short-time compensation is 67% of the lost net remuneration.
On 14/5/2020, the Bundestag passed the Social Package II, which contains further changes to the short-time compensation.
The Social Package II includes, among other things, improved conditions for short-time compensation. These are:
- KUG will be increased to 70% (or 77% for households with children) of the flat-rate net remuneration for those who receive KUG for their working time reduced by at least 50%, from the fourth month of receipt to 70% (or 77% for households with children) and from the seventh month of receipt to 80% (or 87% for households with children) of the flat-rate net remuneration, at the latest until 31/12/2020.
- In addition, the additional earning opportunities for employees receiving short-time work benefits were opened up once again. The possibility of taking up a part-time job from the time of receiving short-time compensation was extended until 31/12/2020. The upper limit for additional income remains the previous monthly income. The newly taken up secondary employment no longer has to be in a system-relevant area as before, but any occupation can be taken up.
Additionally the economic stimulus package from 05/06/2020 announced a tax exemption of top-up amounts to the short-time working compensation. As a rule, employers must implement the latter exemption retroactively.
Hereinafter you will find a summary of the most important information on reduced hours compensation.
I. New regulations for KUG in times of the coronavirus pandemic
- a claim to KUG exists if at least 10% of the employees have a loss of earnings of more than 10%.
- accruing social insurance contributions for lost working hours are reimbursed at 100%.
- payment of KUG is possible for up to 12 months.
- Temporary employees can also go into short-time work and are entitled to KUG.
- in companies in which agreements on working time fluctuations are used, no negative working time accounts are set up.
- the other requirements for the use of KUG remains valid
II. Basic requirements
The legal basis is § 95 SGB III, according to which the following basic requirements must be met:
- Considerable loss of working hours with loss of pay
- It must be an "unavoidable event" (e.g. measures taken by the authorities, Exceptional weather conditions, accident) or
- economic causes (e.g. lack of orders, order cancellation, missing material).
- the loss of work must be temporary and unavoidable.
The minimum requirements are:
retroactively from 01/03/2020 to the end of 2020, at least 10% of the employees must have a loss of earnings of more than 10%.
- on the holding or in the relevant division of the holding
- in the respective calendar month
- Work stoppage must be unavoidable
- the failure may not be due to reasons customary in the industry, customary in the business or seasonal.
- at first, overtime and working time accounts must be reduced - but: no negative working time balances will be built up retroactively from 01/03/2020 until the end of 2020.
- the transfer of employees to another division/department must be examined (temporary transfer if necessary)
- economically reasonable countermeasures must have been taken beforehand (e.g. work in storage, clean-up or repair work).
- Operational requirements
The legal basis is § 97 SGB III.
At least one employee must be employed in the company or the company department
- Personal requirements (of the employees)
The legal basis is § 98 SGB III.
- Continuation of employment is subject to compulsory insurance (without notice of termination).
- Continuation of employment is subject to compulsory insurance for compelling reasons or following training.
- Indication about work loss
The legal basis is § 99 SGB III, according to which
The notification of the loss of work must be received in the month in which the short-time work begins:
- at the employment agency at the company headquarters.
A justification of the substantial loss of work is required.
The following internal company regulations or deadlines must be observed where applicable:
- agreements with the works council and, if applicable, notice periods, if applicable
- short-time work clause within employment contracts
- tariff regulations for the introduction of short-time work compensation
- potentially: individual agreements with the workers.
Insolvency advice - Status as of 02/10/2020
With a comprehensive package of measures, the German government has implemented meaningful relief for companies that may face an insolvency situation as a result of the Corona crisis in spring 2020. The COVID-19 Insolvency Suspension Act - COVInsAG in the version of 27/03/2020 makes important changes to the Insolvency Code as well as to commercial and corporate law in times of the Corona crisis. Due to the limitation of the relief to 30/09/2020 anchored in the law, a further change is currently in the legislative process. Because of their particular importance, we added the planned changes printed in italics:
- The statutory obligation to file for insolvency is suspended until 30/09/2020. This does not apply, if the insolvency maturity is not due to the consequences of the corona epidemic or if there is no prospect of eliminating an existing insolvency. The suspension of the obligation to file for insolvency is extended from 01/10/2020 to 31/12/2020 in cases of over-indebtedness. In case of illiquidity the suspension of the legal obligation to file for insolvency ends on 30/09/2020!
- There is an apparent presumption that the insolvency maturity of companies that were not insolvent on 31/12/2019 is based on the effects of the corona epidemic and that there are prospects of avoiding an existing insolvency.
- This prima facie assumption makes it easier for economically sound companies, their business partners and lenders to document that the statutory relief and limitations of liability can be claimed. However, it does not protect a company that was already ready for insolvency on 31/12/2019 or 01/03/2020.
If the suspension of the obligation to file for insolvency can be claimed with the aforementioned restrictions, further helpful facilitations result:
- The possible personal liability of the managers for payments during the crisis according to § 64 GmbHG or § 92 (2) AktG is limited.
- The rules on rescission for the repayment of newly granted shareholder loans or securities are severely restricted in favour of the shareholders. Thus, repayments of financial assistance newly granted in the crisis until 30/09/2023 shall not be considered disadvantageous to creditors. This is intended to make short-term shareholder assistance possible without the risk of a subsequent insolvency challenge being subject to repayment by 30/09/2023. In addition, the subordination of these shareholder loans to other creditors' claims as provided for in § 39 (1) No. 5 does not apply.
- Further rules on rescission have been relaxed in order to provide business partners and banks with unbureaucratic assistance without exposing themselves to undue risk of rescission during the crisis.
- Insolvency applications by insolvency creditors are made more difficult, but are still possible, provided that the reason for opening insolvency proceedings already existed on 01/03/2020.
- There should be a regulation authorization to extend the law with all effects until 31/03/2021 at the latest.
In summary, it can be said that a very pragmatic framework has been created by the accompanying interventions in the liability norms of the GmbHG and AktG as well as the facilitations for the repayment of shareholder loans granted during the crisis and the defusing of the right of rescission. In particular, the planned apparent presumption makes it easier for many fundamentally healthy companies to document (possibly subsequently required) that they fall within the scope of protection of the law. Companies that were already insolvent before Corona are not protected by this law.
The aforementioned relief will cease to apply from 01/10/2020 for companies that are insolvent. From 01/10/2020, the previously known obligations to file for insolvency in the event of illiquidity will apply. If an insolvency application is submitted late (delay in filing for insolvency), considerable civil and criminal liability standards must be observed.
But even over-indebted companies should not lose any more time in context of the planned time limit of 31/12/2020 to take precautions against an obligation to file for insolvency that threatens from 01/01/2021. Suitable measures are, for example, capital measures that avoid over-indebtedness or the preparation of a so-called positive going concern forecast. In both cases, support from qualified consultants is usually necessary and a certain amount of time should be budgeted for these actions.
Financial assistance to generate liquidity – Status as of 05/10/2020
Subsidies from the federal and state governments:
Financial aid for small and medium-sized enterprises, which have to close down all, or a substantial part of their business operations in the wake of the Corona crisis:
- The application period for Phase I (June to August) has been extended to 9 October 2020
- The financial aid will continue in a Phase II from September to December. The access-conditions will be lowered and the support extended
- Applications for Phase II will be possible in early / mid October
- Applications for both phases can still be made exclusively via tax consultants, auditors / sworn accountants and lawyers - here is a brief summary of the most important facts:
- Self-employed persons in sideline employment
- Companies that have ceased business operations or filed for bankruptcy.
- Companies that were in difficulties as defined by the EU on 31 December 2019
(for small and micro-enterprises: only if they have been the subject of an insolvency proceeding or have received rescue aid they are regarded as a company in difficulties)
- Companies qualifying for the Economic Stabilisation Fund
- Flexibilisation of the entry threshold: In the future, applicants are entitled to submit applications if they either had
- a slump in sales of at least 50% in two consecutive months in the period April to August 2020 compared to the respective months of the previous year, or
- a slump in sales of at least 30% on average in the months April to August 2020 compared to the same period of the previous year have listed
- complete deletion of the KMU- maximum amounts of EUR 9,000 and EUR 15,000
- Increase of the subsidy rates. In the future, the following amounts will be reimbursed:
- 90% of fixed costs with more than 70% slump in sales (previously 80% of fixed costs),
- 60% of fixed costs in the event of a sales slump between 50 and 70% (previously 50% of fixed costs) and
- 40% of fixed costs in the event of a sales slump of more than 30% (previously in the event of a sales slump of more than 40%)
- the flat rate for personnel costs of 10% of the eligible costs is increased to 20%
- In the future, it should be possible to make additional payments and reclaims during the final billing-procedure
- Companies should receive a maximum of EUR 200,000
- Eligible costs are ongoing, contractually based or officially determined fixed costs incurred during the funding period that cannot be changed unilaterally, such as rent, interest expenses for credits and loans, licence fees, insurance, costs for trainees, costs for applying for the financial aid (tax consultant), etc.
- Cost of living/entrepreneurial wage
- Costs for private rooms
- Fixed costs to affiliated companies
Who receives the financial aid?
The financial aid will be granted to small and medium-sized enterprises across all sectors of industry that have had to cease their business activities completely or to a significant extent as a result of the Corona crisis.
Not eligible to apply:
What changes in Phase II?
What costs can be considered?
Not eligible for funding:
Full details of the financial aid program can be found here:
If you are interested in applying for the financial aid, please contact your regular contact person or send us an e-mail to email@example.com .
Loans:KfW Corona help
In order to improve your liquidity and cover running costs, entrepreneurs and freelancers can apply for a KfW loan with a risk assumption by the KfW with up to 100%. The application can only be made through your house bank.
You can use the following link to prepare the application for a KfW loan in accordance to your specific application- and capital requirements for the bank meeting:
Various loan-based development programmes for corporate financing are offered through the Landesbanken. Some of the development programs can also be used to bridge liquidity bottlenecks caused by companies' loss of sales due to the corona virus. For small and medium-sized enterprises, for example, the development programmes "KfK - Kapital für Kleinunternehmen" for Hessen or "Betriebsmittelkredit RLP" for Rheinland-Pfalz are available here.
WI-Bank will also be offering so-called microloans for a limited group of recipients from 03/04/2020.
Applications are made exclusively through the house bank procedure or in conjunction with the cooperation and regional partners (chambers of trade and industry).
Here you can find detailed information on application requirements and conditions:
Wirtschafts- und Infrastrukturbank Hessen:
Investment and Structural Bank Rheinland-Pfalz:
Please note that the level of information is constantly developing dynamically. You can find the detailed and up-to-date application requirements and conditions in the links above.
Tax aid measures by the tax authorities in the context of the Corona crisis - Status as of 02/10/2020
In order to combat the economic consequences of the corona pandemic, the tax authorities have adopted the following measures to alleviate the additional burden of tax payments:
Deferral of tax payments:
If your company is unable to make tax payments due to the economic consequences of the corona pandemic, it is possible to defer these payments until 31/12/2020 without interest. Income tax, corporation tax, real estate transfer tax, inheritance tax and and sales tax amounts can be deferred. The deferral of trade tax amounts must be applied for separately at the responsible municipality.
You have to explain to the tax office how the Corona pandemic is affecting your economic situation. However, the value of the damage incurred does not have to be substantiated in detail.
Adjustment of advance payments:
Companies, self-employed and freelancers can have the amount of their advance payments adjusted for income tax, corporate income tax and trade tax if their income from the corona pandemic in the current year is expected to be lower than expected before the corona pandemic.
Suspension of enforcement measures:
Enforcement of overdue tax debts is to be waived until the end of the year. Late payment surcharges, which are legally due during this period, are to be waived. This concerns income tax, corporate tax and value added tax.
Deferral of enforcement is also possible for tax amounts that are already in an ongoing enforcement procedure upon application to the tax authorities.
Repayment of special advance payments of turnover tax:
If you have made a special advance payment for tax on sales/purchases to the tax office in order to obtain a permanent extension of the deadline for submitting advance returns for tax on sales/purchases, this special advance payment can be refunded on request without losing the extended deadline in the advance return procedure.
Extended deadline for advance return for tax on sales/purchases:
In principle, you are still obliged to submit and pay the advance return for tax on sales/purchases on time. If you are so affected by the consequences of the Corona pandemic that you are unable to fulfil your obligations in this connection, the tax authorities may grant an extension of the deadline on request.
Tax-free special payments:
In order to recognise the increased benefits of employees in times of the Corona pandemic, the special benefits granted by employers, which are paid between 01/03/2020 and 31/12/2020, will be tax and social security free up to an amount of EUR 1,500. The special payments can be in cash or in material performance.
Reduction of VAT rates:
In order to strengthen demand and to promote consumer behaviour, the second Corona Tax Assistance Act reduces the regular VAT rate from 19% to 16% and the reduced rate from 7% to 5% for the period from 01/07/2020 to 31/12/2020. The first Corona Tax Assistance Act has already provided for a reduction in VAT for restaurant and catering services, with the exception of the distribution of beverages, from 19% to 7% for the period from 01/07/2020 to 30/06/2021. The general reduction in the VAT rate now means that this tax rate is even reduced to 5% for the period from 01/07/2020 to 31/12/2020.
Flat-rate reduction of advance payments already made for 2019:
Companies that generate profit income or income from renting and leasing and are expected to report a loss as a result of the Corona pandemic in 2020 can have the advance payments made in 2019 reimbursed via an anticipated loss carryback from 2020. The loss for 2020 is assumed to be a flat rate of 15% of the income from 2019. The loss actually incurred in 2020 will be taken into account in the annual tax assessment for 2020.
Furthermore, the tax loss carrybacks for the years 2020 and 2021 were increased from EUR 1 million (joint assessment EUR 2 million) to EUR 5 million (joint assessment EUR 10 million).
Degressive depreciation on movable assets:
As a fiscal investment incentive, a declining balance depreciation of 2.5 times the normal depreciation, up to a maximum of 25%, per year was introduced for movable fixed assets for the years 2020 and 2021.
Trade tax relief:
The reduction factor in the tax reduction for income from business operations was increased from 3.8 times to four times the trade tax base. In addition, the allowance for trade tax additions, such as for interest on debts, was increased from EUR 100,000 to EUR 200,000.
By clicking on the following link, you can access an FAQ catalogue on the website of the Federal Ministry of Finance, which provides information on the most frequently asked questions in connection with the tax relief measures.https://www.bundesfinanzministerium.de/Content/DE/Standardartikel/Themen/Steuern/2020-04-01-FAQ_Corona_Steuern.html?cms_pk_kwd=06.04.2020_FAQ+Corona+Steuern+&cms_pk_campaign=Newsletter-06.04.2020
Accountancy – Status as of 02/10/2020
Effects of the spread of the coronavirus on the financial statements as of 31/12/2019
The economic effects of coronavirus also have consequences for the commercial accounting of the financial statements and management reports of the companies or groups concerned.
In professional notes dated 04/03 and 25/03/2020, the German Institute of Auditors (IDW) issued a statement on the "Effects of the spread of the coronavirus on the financial statements as of 31/12/2019 and their audit". Accordingly, there are already far-reaching effects on the annual financial statements under commercial law and as at the reporting date of 31/12/2019 and the management report for the 2019 financial year, such as:
- The effects of the coronavirus are to be taken into account as a value-determining development from January 2020 for the first time in financial statements with a cut-off date after 31/12/2019.
- The nature and financial effects of the coronavirus on the company are to be reported - if material - in the supplementary report in the notes. There is no general reporting obligation. The need to report depends on the individual company's exposure to the effects of the corona pandemic on its future development. A "nothing to report" is not required.
- The effects of developments relating to coronavirus on the company are to be dealt with in the risk report in the management report in 2019. For companies whose activities are significantly affected by the spread of the coronavirus, purely comparative forecasts are exceptionally permissible.
- A break in the consistency of recognition and measurement can be justified by the effects of the corona crisis, provided that this provides a better insight into the net assets, financial position and results of operations.
- Continuing operations must be valued independently of the balance sheet date. In this respect, an exception to the reporting date principle applies to the assessment of the appropriateness of the going concern assumption.
- Under certain conditions, it is considered permissible to consider the accounting consequences of a restructuring measure implemented after the balance sheet date of 31/12/2019 already as of the balance sheet date.
- Small corporations are not required to prepare a management report. They are also not required to include a supplementary report in the notes to the financial statements. For micro-corporations, neither an appendix nor a management report is required. However, if there are material uncertainties in connection with events and circumstances that could cast significant doubt on the company's ability to continue as a going concern (so-called going concern risks), the preparer of the financial statements must report on them. Small corporations must include such reporting in the notes to the financial statements. For micro-corporations, the reporting must be included below the balance sheet.
The above notes are intended to provide initial guidance on how to deal with the effects of the coronavirus in external accounting and do not claim to be complete. They are based on the technical notes of the Institute of Auditors (IDW) dated 04/03 and 25/03/2020 on "Effects of the spread of the coronavirus on the financial statements as of the reporting date 31/12/2019 and their audit". In addition, on 08/04/2020 and on 02/07/2020, the Institut der Wirtschaftsprüfer (IDW) (Institute of Public Auditors in Germany) commented on questions of doubt regarding the above-mentioned subject area.https://www.idw.de/blob/122498/31bce74e5b1413b91f74c9de1ea64383/down-corona-fachlicher-hinweis-idw-dok1-data.pdf
We will be happy to assist you at any time with questions regarding the handling of the effects of coronavirus in the context of external commercial accounting.