The Three Pillars of Governmental Aid during Corona Crisis – An Overview

March 25, 2020

By RA Till Heinrich

The German Federal Government and numerous regional governments have launched various aid programmes to help companies in Germany in different ways to overcome the economic consequences of the Corona crisis. Facilitation of tax liabilities and amendments in contract law are intended to prevent the most serious consequences such as contract terminations and insolvencies for a limited period of time.

It is difficult to navigate the various packages and aid programmes. Therefore, we have organized them in three pillars. Under each pillar, we have included a short overview with program descriptions and a short assessment:

Pillar 1: Legal Measures

Various legal and administrative measures have been taken to counteract the financial bottlenecks resulting from the Corona crisis. Here is an exemplary overview:


  • a. Income tax
    All income taxes due or becoming due (e.g. additional payments) can be deferred interest-free until 31st of December 2020 upon application to the responsible authority. Advance payments can be adjusted or completely suspended. However, proof of your individual financial impact is required for this.
  • b. Corporate income tax
    The same rules apply for corporate income tax.
  • c. Commercial tax
    The same rules apply as for income tax, but applications must be submitted to the relevant local authority.
  • d. Value added tax
    Also the VAT can be deferred on request. Advance payments can be reduced or suspended. In addition, the already submitted and paid special VAT advance payment (1/11) can be repaid or deferred interest-free.
  • e. Wage tax
    In general wage taxes have to be paid and are officially excluded from the deferral rules. However, the tax offices are required not to carry out any enforcement measures until 31st of December 2020, nor to levy any late payment penalties. As a result, this is effectively equivalent to a deferral. However, the taxpayer must inform the tax office that he has run into payment difficulties as a result of the Corona crisis.


Consumers or small enterprises (up to 9 employees and up to EUR 2 million turnover p.a.) will receive a deferral of all performance and payment obligations until 30.06.2020 (in the form of a right to refuse service or payment). This deferral only concerns contracts concluded before 08.03.2020 and so-called continuing obligations. It does not apply to purchase or so-callled Werkverträge, rental and loan agreements and not to employment contracts.

This regulation is subject to the condition that otherwise a reasonable livelihood or the economic basis would be endangered. However, the right to refuse service is also limited inversely, namely if the economic basis of the contractual partner would be endangered by the non-performance. In this case, however, there is a right of withdrawal or termination.

Although the obligation to pay rent remains in force, for the period from 01.04.2020 to 30.06.2020 the landlord may not terminate the lease agreement due to rent debts if the tenant is unable to pay the rent because of the consequences of the Corona crisis. If this is questioned by the landlord, he would have to prove the contrary. This rule applies to both companies and private individuals. If the tenant does not pay the rent or only pays part of it, he has two years to pay the rent deficiency. Only then may the landlord terminate the contract.

If consumers are unable to pay the interest or to repay/ amortise the loan, these arrears shall be deferred for six months and the credit agreement shall be automatically extended by three months. Termination due to late payment or deterioration in financial circumstances is excluded until three months after the due date.

These rules apply exclusively to loan agreements with consumers contracted before the 15.03.2020 and only if the payment of the contractual obligations would threaten the consumers appropriate livelihood.

Pillar 2: Short-term Financial Aid

More and more regional governments and also the federal government have now announced short-term financial aid. These are grants of up to approx. 30,000 EUR (depending on the offer and programme). These grants are not loans or credits and therefore cannot be repaid. They are real financial aid.

The programs known to us so far are explicitly to be seen as tide-over aids. This is intended to secure the liquidity of the entrepreneurs for the period between applying for other aid (see in particular Pillar 3) and the granting or payment of such aid. But these are often linked to the use of other aids, especially other loans. The offers we have examined so far are bound to concrete conditions which you must fulfil.


  • It must be proven that a financial aid is necessary to secure the professional or business existence in the corona crisis;
  • other federal support programmes or entitlements from social welfare and other statutory benefits (e.g. short-time working allowance, basic income support) must be claimed in parallel.
  • The amount of the grant is limited to 5,000 euros; however, individuals can apply for a grant again after 6 months, companies after 3 months.



  • it must be decelared or prooven (not shure yet) that a financial aid is necessary to secure the professional or business existence in the corona crisis;
  • in contrast to Berlin, no further use of federal aid is required.
  • The amount of the subsidy is up to 9,000 euros for three months for solo self-employed persons and companies with up to 5 employees, up to 15,000 euros for three months for companies with up to 10 employees and up to 30,000 euros for three months for companies with up to 50 employees.


Our opinion:

These offers are aimed at entrepreneurs who will take advantage of further assistance and need a cash injection to bridge the gap until the aid is paid out. This aid is suitable and good for this purpose, especially since it is a real subsidy and does not have to be repaid.

Pillar 3: Subsidised Loans

The federal and state governments have provided or improved various offers subsidised by state banks. These are mainly existing offers for corporate loans, for which the state subsidies in the form of bank guarantees have been improved.

What they all have in common is that these are offers from your house bank or from a bank or Sparkasse that you commission, which then concludes a loan agreement with you. Due to the state subsidy, the house bank will be able to offer you better conditions than is usually the case with a simple loan. If you apply for a loan for investments and working capital, the KfW or another state bank will assume part of the risk of your bank. This increases your chances of obtaining a loan approval.

At the same time, however, the house banks still require additional collateral. Here, in addition to your own collateral, you can also use the Bürgschaftsbank. The Bürgschaftsbank receives further fees, which make the loan even more cost-intensive.

Often the house banks will also work out their own offers. This could be even more attractive for you, so that you can certainly listen to these offers.

The Berlin rescue package is definitely exciting, but it is also aimed exclusively at Berlin companies that are at least 3 years old. Here, operating funds of up to 0.5 million euros are financed with an interest-free loan with a term of 2 years. However, the loan must be secured in the form of a personal guarantee, which represents an enormous risk for the entrepreneur. The entrepreneur is liable for the repayment of the loan with his entire private assets.

Our assessment:

Even before the Corona crisis, the subsidised loans from the KfW were a good way for young companies to obtain good and relatively cheap loans. This has not changed.

However, it must also be made clear once again: You will get nothing for free here! The house bank, the development bank and, if necessary, the Bürgschaftsbank all earn on the loan and that means that you have to pay interest.

In the end it is a normal loan at possibly slightly better conditions than the usual market conditions. However, this is always interesting, especially for companies that have perhaps not yet built up a high credit rating.

Here you will find the most important links to the offers of the federal government and some federal states:

offers of the federal government
Corona Safeguard general information
ERP start-up loan (companies younger than 5 years)
ERP entrepreneur loan (company older than 5 years)

offers from Baden-Württemberg
emergency relief BW
liquidity credit from L-Bank
Start-up financing/ (companies younger than 5 years)
Growth financing (companies older than 5 years)
Innovation financing (financing of innovation and digitisation)

offers from Berlin
Rescue aid Corona I (companies older than 3 years)
Rescue aid Corona II (freelancer and small companies up to 5 employees)



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