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27 March 2020

Economy and Finances

FAQs: Multi­bil­lion-eu­ro pro­tec­tive shield for Ger­many

Abbreviation "FAQ" (Frequently asked questions)
Source:  iStockphoto.com/porcorex

What is the German government doing and will it be enough?

The German government is taking all the measures that are necessary. We are stabilising the economy, and we are allocating record amounts of financial resources to assist workers, businesses and the self-employed. Grants and loans will be provided to freelancers, self-employed individuals and small businesses. A large-scale special fund is being set up to stabilise the real economy. We are making it easier for people to obtain basic income support and housing benefit, and we are taking numerous additional measures to protect workers and tenants who run into financial difficulty. We are strengthening the health care system and providing large-scale funding that will be targeted towards preventive measures, diagnostics, and research to develop vaccines against Covid-19. Germany is financially prepared to respond to a crisis like this. We have the capacity to maintain these measures for a long time – our sound fiscal policy is paying off.

What assistance programmes have been set up, and who are the target groups?

The German government has launched a multibillion-euro assistance package. We are constantly expanding this package, which currently encompasses the following measures:

  • an Economic Stabilisation Fund that will grant liquidity guarantees and provide companies with additional equity
  • immediate assistance (direct grants) for small businesses, self-employed individuals and freelancers
  • a multibillion-euro assistance programme to safeguard the liquidity of companies, freelancers and the self-employed (KfW special loan programmes and expanded guarantee programmes)
  • strengthening the financial position of hospitals through cost offsets
  • easier access to basic income support for self-employed people
  • expansion of the short-time work scheme
  • easier access to social security schemes

What are we doing for companies (of all sizes?)

Various types of assistance will be available to all companies depending on their size: these include grants, loans, guarantees and optional tax deferrals. Employers have the option to join the short-time work scheme (Kurzarbeit), which provides compensation to workers whose working hours have to be reduced.

The government-owned promotional bank KfW is providing extensive access to loans. Established companies (at least five years on the market) can apply for KfW Entrepreneur Loans (Unternehmerkredit). Young companies (less than five years on the market) have access to ERP Start-up Loans (ERP-Gründerkredit). Medium-sized and large firms will continue to have access to syndicate financing. More information on KfW’s special programmes is available at KfW coronavirus aid: loans for companies.

The new Economic Stabilisation Fund will enable large companies to obtain large-scale government guarantees. In addition, the fund can support companies by providing additional equity capital on a temporary basis.

In addition, companies may apply to their tax office for deferrals of income tax, corporation tax and VAT payments. They can also apply for adjustments to prepayments of taxes on earnings. Furthermore, enforcement measures in connection with overdue tax payments can be waived until the end of the year. 

What are we doing for micro businesses and self-employed people?

We have set up an Immediate Assistance Programme (Soforthilfeprogramm) to provide grants to small businesses, self-employed individuals and freelancers. These grants are meant to cover rental and leasing expenses, for example. Self-employed persons and companies with up to five employees (full-time equivalents) may receive one-time grants of up to €9,000. Small businesses with up to 10 employees (full-time equivalents) may receive one-time grants of up to €15,000. The grants cover a three-month period. Applications for these grants must be filed with the government of the Land where the person or business is resident.

KfW loans are also available. For more information, see KfW coronavirus aid: loans for companies. Applications are subject to the same rules that apply to companies.

In addition, self-employed individuals can apply for basic benefits for jobseekers (Grundsicherung für Arbeitssuchende); the eligibility criteria for this programme have been simplified in response to the coronavirus pandemic.

What are we doing to strengthen the health care system?

An additional €3.1 billion has been allocated to the Federal Ministry of Health. These funds will be used to procure face masks and protective suits, to top-up the budget of the Robert Koch Institute, and to support the international efforts of the World Health Organization. The Federal Ministry of Education and Research is receiving €145 million for the development of a vaccine and for treatment-related measures. In addition, hospitals and doctors who have their own practices will receive financial support if they incur revenue shortfalls due to the crisis. Furthermore, an extra €55 billion is being made available for additional measures to fight the pandemic.

What are we doing to support families?

If parents cannot go to work due to the closure of schools or childcare centres, the government will make up for part of the earnings they lose. Parents who have to work short-time will be given easier access to the child supplement for low-income families (Kinderzuschlag). Tenants will also be given greater security: people cannot be evicted from their homes or business premises if they have to delay rent payments due to the effects of the pandemic. The same applies to electricity, gas and telephone connections. An overview of the social security package adopted by the German government in response to the coronavirus pandemic can be found (in German) here.

What are we doing for employees?

Companies that experience work shortages of over 10% as a result of the coronavirus crisis can apply to join the short-time work scheme (Kurzarbeit), which provides compensation to employees at these firms. The benefit is also available to temporary/agency workers. Under the short-time work scheme, employees whose working hours are reduced generally receive 60% of the shortfall in their standardised net wages. This increases to 67% for households with at least one child. Applications are filed by employers and must be submitted to the Federal Employment Agency.

What are we doing for employers (and to safeguard jobs)?

Companies that experience work shortages of over 10% as a result of the coronavirus crisis can apply to join the short-time work scheme (Kurzarbeit), which provides compensation to employees at these firms. Access to this benefit is being granted with retroactive effect from 1 March 2020. The social insurance contributions that employers have to pay when they are using the short-time work scheme are reimbursed in full. The benefit is also available to temporary/agency workers.

Further information on Germany’s short-time work scheme can be found here.

What kind of tax relief and tax deferrals have been adopted?

The German government is temporarily relaxing the rules on tax payment deferrals, including payments of income tax, corporation tax and VAT. This provides taxpayers and companies with an important ‘payment holiday’. It is also possible to apply for adjustments to prepayments of taxes on earnings. Furthermore, enforcement measures in connection with overdue tax payments can be waived until the end of the year.

If you have questions regarding the eased rules for income tax, corporation tax and VAT payments, please contact your local tax office (Finanzamt). If you have questions regarding the taxes administered by the customs administration (such as energy duty and aviation tax), please contact your local Main Customs Office (Hauptzollamt). Further information on assistance being provided in connection with customs and excise duties is provided (in German) by the customs administration.

What is the German government doing to help companies and self-employed people experiencing liquidity shortfalls?

To boost the liquidity of companies, the German government is temporarily relaxing the rules on tax payment deferrals. KfW programmes for low-cost loans have been expanded and simplified. The rules that apply to companies also apply to freelancers and self-employed individuals. More information on KfW’s special programmes is available at KfW coronavirus aid: loans for companies.

What are the terms of loans, and what are the interest rates?

Terms: to finance investments or operating costs such as rent and wages, loans are being offered with terms of up to five years. These loans will have to be paid back incrementally starting in the second year. Another type of loan for operating costs is being offered that has to be paid back in full after a term of two years. Annual interest rates for small and medium-sized companies range from 1% to 1.46%. Annual interest rates for larger companies range from 2% to 2.12%. More information is available in English at https://www.kfw.de/kfw.de-2.html.

How long will it take for my loan application to be processed, and what documentation do I need?

The German government is placing a high priority on ensuring that affected companies receive the funds they need quickly and easily. To this end, the following rules apply: For loans of up to €3 million per company, only the company’s main bank (Hausbank) makes the assessment and decision. KfW will refrain from conducting its own risk assessment in these cases. For loans of up to €10 million, KfW will conduct an assessment in addition to the main bank’s assessment, but will use a simplified procedure with simpler documentation requirements.

KfW has set up a website (https://corona.kfw.de, in German only) where companies can do quick, easy advance work on loan applications for their main banks. The website tells users what loans are suitable and available, what the maximum loan amount is, and what documentation is needed for filing an application.

Where can non-profit organisations access help if they run into financial difficulties?

The public sector will be given a mandate to provide for organisations offering social services. They will continue to receive funds, even if the coronavirus epidemic means that they cannot work at all or can only perform very limited work. An overview of the social security package adopted by the German government in response to the coronavirus pandemic can be found (in German) here.

In individual cases, schemes such as short-time work (Kurzarbeit) or assistance to self-employed individuals may also be an option. Non-profit organisations are not, however, suited to the schemes that KfW offers for business enterprises. Nevertheless, where organisations own assets in the form of business enterprises, such enterprises may take out KfW loans and take part in KfW’s guarantee schemes.

How is the German government protecting German businesses from takeovers?

The German government is activating an Economic Stabilisation Fund. The fund has significant resources at its disposal to provide loan guarantees and to boost equity. This will allow the state to acquire holdings in businesses to protect them from takeovers, if necessary.

What can I do if I’m at risk of insolvency due to the crisis?

The government is suspending, until 30 September 2020, the regular requirement that insolvency filings must be submitted within a three-week period. This will help to prevent situations where businesses have to file for insolvency simply because liquidity assistance has not reached them on time. The Federal Ministry of Justice and Consumer Protection is preparing the legal provision for this. Affected businesses should immediately deal with their liquidity. For further information, see the KfW special programmes at KfW coronavirus aid: loans for companies.

How is the German government protecting exporting companies and their exports?

The German government is making available flexible, effective and comprehensive support in the form of export credit guarantees (known as Hermes covers). These guarantees will be complemented by a well-funded KfW programme for refinancing export business. If there is a need for additional export cover and refinancing, the authorised amount can be increased very quickly.

How much money is Germany allocating to fight the crisis?

The government has launched the largest assistance package in the history of the Federal Republic.

Up to €50bn has been allocated to the Immediate Assistance Programme for micro businesses and self-employed persons. This funding can cover up to three million self-employed individuals and micro businesses for a period of three months (plus two additional months under some circumstances).

Protecting health and stabilising the health care system: The German government is allocating €3.5bn for health-related measures including protective equipment as well as the development of a vaccine and additional treatments. Another €55bn will be made available for additional measures to fight the pandemic. The Federation is establishing a protective shield for hospitals, amounting to roughly €2.8bn in funding, to mitigate revenue shortfalls and higher costs. Health insurance providers are contributing an additional €5bn to this amount.

The German government has put KfW in a position to expand its loan programmes on a massive scale. The federal budget currently provides for a guarantee framework of approximately €465bn; with the supplementary budget, this guarantee framework will be expanded by €357bn, to €822bn.

The new Economic Stabilisation Fund to protect large companies against takeovers makes available €100bn for equity measures and €400bn for guarantees. The fund can also provide up to €100bn to refinance the KfW programmes that have already been adopted.

An additional €7.5bn are available to allow self-employed persons to access basic benefits for jobseekers (Grundsicherung für Arbeitssuchende) more easily.

Whom should I contact if I need financial assistance?

  • Applications to join the short-time work scheme (Kurzarbeit) are filed by employers and must be submitted to the Federal Employment Agency.
  • Applications for a loan from KfW’s package of measures must be filed via your bank or another financing partner.
  • Applications for tax deferments must be filed with your local tax office (Finanzamt).
  • Applications for child supplements for low-income families (Kinderzuschlag) must be filed with the Federal Employment Agency (Bundesagentur für Arbeit).
  • Applications for basic benefits for jobseekers (Grundsicherung für Arbeitssuchende) must be filed with your local job centre.
  • Grants for self-employed persons and micro businesses must be filed with the designated Land authorities.