The German Chancellor has confirmed that the German Federal and State Governments are willing to "do everything that is necessary and that Germany needs in order to get through this crisis as well as possible". The German Government has pledged to confront all problems associated with the COVID-19 pandemic with decisive economic and fiscal policy measures. Here is what we know so far.
Loan Facilities and Guarantees
There will be an "unlimited" credit program for companies. Whilst "unlimited" will not mean unlimited, this is good news.
The package envisages a massive expansion of loans provided by KfW, Germany's Development Bank. In addition, the Development Banks of the individual Federal States have a number of funding programmes that they will make available to offset some of the current economic difficulties. In particular, the following facilities will be made available:
- So-called acute loans (of up to EUR 2 million);
- Existing liquidity assistance programmes will be expanded to make it easier for companies to access cheap loans from private banks (e.g. by relaxing the usual covenants and amending the turnover threshold);
- Guarantees including export credit guarantees (known as Hermes covers), and
- 'General' loans (of up to EUR 5 or 10 million).
Tax-Related Liquidity Assistance for Businesses
The Tax Authorities will show greater flexibility. Options for deferring tax payments and reducing prepayments will be enhanced, and enforcement rules will be relaxed, to assist in improving businesses' liquidity. Key measures are:
- Companies will be allowed to defer tax payments if their collection would lead to significant hardship;
- Tax prepayments may be reduced if a taxpayer's income in the current year is expected to be lower than in the previous year; and
- Enforcement measures (e.g. attachment of bank accounts) and late-payment penalties may be waived until 31 December 2020 where the debtor of a pending tax payment is directly affected by COVID-19.
Short-time Work Allowance
A new bill will be adopted to facilitate access to short-time work allowance. We expect the new legislation to come into force in the first half of April, and expect it to provide include the following:
- A company may announce short-time work if it sees orders decline or if there is less work as a result of difficult economic trends, and a minimum of 10% of its workforce (previously 30%) could be affected by a lack of work.
- It will be possible for a company to dispense in full or in part with the requirement that negative working hour balances must be established before short-time work allowance can be paid. The current legal situation means that companies that have agreements to deal with fluctuations in workload must also use these to avoid short-time work, meaning that workers' working hour balances become negative. Under the new rules, the Employment Agencies may waive this requirement.
- In contrast to the current legislation, contract workers will be eligible for short-time work allowance.
- Mandatory employer social insurance contributions that employers will be fully reimbursed for by the German Federal Employment Agency.
In addition, the promotion of advanced training for employees will be further extended: in particular, there will be higher subsidies if a larger percentage of a company's employees need advanced training. Support will be available where an employee takes a professional qualification retrospectively. This is intended to create an incentive to use short-time work for further training to reskill employees for different jobs which may be required after the crisis.
If you or your team in Germany would find it helpful to discuss any of the above or require any support or guidance, please let us know. We will continue to keep up-to-date with all available support measures and will be very pleased to assist.