Covid19: Urgent measures for Mittelstand-shaped businesses in Baden-Württemberg

published on 26 March 2020 | reading time approx. 7 minutes


The economic impacts of the Covid-19 crisis have led to diverse offers of assistance from the German Federal and State governments. The information below is intended to facilitate access to the available assistance services in particular for companies from Baden-Württemberg. Should you have any questions, please contact our Covid-19 Management Team in Rödl & Partner Stuttgart office – regarding your foreign operations worldwide you can use our global Impact & Solution Monitoring.



The current measures at Federal and State level:

Reduced working time and compensation for reduced working hours

In view of a decline in orders and sales, which is sometimes quite dramatic, some employees can no longer be employed to their usual extent. However, redundancies should be avoided. In this situation companies can apply for reduced working time compensation. Reduced working time compensation means that 67% (in case of employees with children) or 60% (in case of employees without children) of the generalised net payroll is paid by the German Federal Employment Agency. Employees work little or not at all during this period, but they must explicitly agree to shorter working hours – unless this matter has been covered in the employment contract. Certain criteria must also be satisfied in order to become entitled to apply for the reduced working time compensation - which entitling criteria the Federal Government has amended at short notice because of the Covid-19 crisis:

  • Instead of 30% of the personnel previously, in future only 10% of the employees have to be affected by loss of earnings by more than 10% of their monthly gross payroll.
  • The practice of building up negative working time accounts will be abandoned in part or even entirely.
  • Temporary staff will also be able to receive reduced working time compensation in future.
  • Social security contributions will also be covered by the Federal Employment Agency.


These relief measures are deemed to have taken effect retroactively since 1 March 2020. Thus, reduced working time compensation can be paid out retroactively. Businesses can already apply for reduced working time compensation in accordance with the amended criteria.


Relief on social security contributions

In some cases, it is possible under the applicable law to defer payment of social security contributions (Article 76 Paragraph 2 Sentence 1 Item 1 of the German Code of Social Law [SGB IV]). According to this legal provision, claims to the entire social security contribution may be deferred where immediate collection would place the company at a considerable disadvantage and deferral does not endanger the claim. A considerable disadvantage for the company is deemed to exist where the company is temporarily facing serious financial difficulties because of unfavourable economic circumstances or would have to face such difficulties if the outstanding social security contributions were collected immediately. It looks like these conditions would be met in many cases.


No respective orders or regulations have yet been issued so far because of the Covid-19 crisis; however, we expect statements and relief in the coming weeks. The health insurance fund is the competent collection agency to decide on the deferral application, exercising a prudential judgment. Companies can apply for a deferral of their social security contribution payments at any time.


Tax relief to protect liquidity

The German Federal Government has decided to take a number of tax relief measures in order to improve the liquidity situation of companies facing financial difficulties as a result of the Covid-19 crisis and through no fault of their own. The relief measures apply specifically to personal income tax, corporate income tax and value-added tax. In addition, there is also responsiveness on the part of customs authorities. Anyone who defers taxes does not have to pay interest or to fear enforcement. Late payment fines have also been waived. Applications for deferral of trade tax are processed at the respective municipality level.


A simplified form for the applications is available on the website of the tax offices in Baden-Württemberg to ensure to ensure fast, streamlined and workable procedures for the affected taxpayers and tax authorities.


1. easier grant of deferrals on tax payments

From now on, tax authorities can grant companies deferral of their tax payments at a larger scale where collection of tax liabilities might put the company concerned in a particularly difficult situation or even threaten its existence in the worst-case scenario. Tax authorities were instructed not to impose strict requirements when granting deferral of tax payments. A key arrangement in this respect is to postpone the deadline for tax payment so that the company could maintain better liquidity.


Deferrals can be granted for payment of taxes on income (personal income tax, corporate income tax, solidarity surcharge, trade tax) and value-added tax. No deferrals will be granted for withholding taxes (payroll tax and capital gains tax).


2. easier adjustment of your advance tax payments

Tax authorities were instructed to simplify the procedure for adjustment of the advance tax payments by the taxpayer where it is foreseeable that sales or income of the taxpayer company for this year will be lower than assumed previously because of the Covid-19 crisis. Here too, the aim is to enable the companies to maintain better liquidity by reducing their tax advance payments quickly and easily.


3. waiver of enforcement measures and fines for late payment

If your company has been directly affected by Covid-19, tax authorities waive their enforcement measures (such as account seizure or late payment fine) until 31 December 2020. Moreover, no interest will be accrued on tax arrears until further notice. This is intended to prevent companies from additional loss of their liquidity, which is necessary for the survival of their operations during the crisis, as result of collecting the tax amounts they cannot afford to pay in the short term.


4. relief on customs duties, excise taxes and transport taxes

In addition to the above measures, the General Directorate of Customs has been instructed to be more flexible in meeting the needs of taxpayer companies in the case of taxes for which the customs administration is directly responsible (for example energy tax or air transport tax) in order to enable these companies to maintain their liquidity. The same applies to taxes which are the responsibility of the German Federal Tax Office [Bundeszentralamt], such as insurance tax or value-added tax.


For further information, please refer to the article „Foreign Trade/Customs and Excise Taxes”. 


According to our current practical experience with tax authorities in Baden-Württemberg, these relief arrangements are granted without undue delay in justifiable cases. We recommend companies to contact the responsible authorities at an early stage - usually by phone. In our experience, it is sometimes possible to recover some of the tax amounts already paid. Although this is not in line with the envisaged application procedure, an attempt should be made to clarify face-to-face/by phone with the relevant person in charge whether this possibility is available.


Easier access to loans to secure liquidity (German Federal Government)

In addition to tax reliefs, the German Federal Government has been offering additional and mainly easier accessible bridging loans since last week. They are intended to help cushion liquidity bottlenecks caused by declining sales not attributable to the affected company.


1. access to favourable KFW loans

The Kreditanstalt für Wiederaufbau (KfW) offers a broad range of relatively easily accessible and cost-attractive loan arrangements. An application for a KfW loan can be submitted through your house bank. In particular, these are:

  • For young companies and freelancers (established less than five years ago), KfW offers its ERP-Gründerkredit Universell (ERP Universal Start-up Loan) arrangement that includes risk coverage of up to 80% of the input costs to a maximum amount of EUR 200 million. A new feature is the release from liability for large enterprises with an annual turnover of up to EUR 2 billion.
  • For existing enterprises (more than five years in the market), KfW offers its KfW Unternehmerkredit (Entrepreneur Loan) arrangement with risk coverage of up to 80% of the input costs to a maximum amount of EUR 200 million. A new feature here is also release from liability for large enterprises with an annual turnover of up to EUR 2 billion. In addition, there is KfW Kredit für Wachstum (Loan for Growth) arrangement with an extended service scope. Here the turnover ceiling for enterprises eligible to apply has been raised from EUR 2 billion to EUR 5 billion. Moreover, the programme previously limited to enterprises operating in the innovation and digital sectors has been expanded to availability to all companies by way of syndicated financing, without being restricted to a particular sector. The risk coverage will be increased to 70% (previously 50%).
  • In addition, special KfW programmes will be launched for all companies in foreseeable future. They are currently still subject to approval by the EU Commission. It is planned to improve the risk coverage for investment resources (release from liability). In future it will be up to 90% for investments and up to 80% for input costs. In addition, risk tolerance will also be increased with account of the crisis, so that the special KfW programmes can also be enjoyed by enterprises facing crisis-caused temporary financing difficulties.




2. guarantees to support liquidity

For companies and businesses whose business models had been sustainable and profitable prior to the Covid-19 crisis, guarantees for operating resources can be made available through their house banks. However, an applicant company may not be a restructuring case or a company in a difficult financial situation emerged before the Covid-19 crisis. Guarantees up to EUR 2.5 million are processed directly by the responsible guarantor banks, and guarantees over this ceiling will be processed by the federal states or their own public development institutions (in Baden-Württemberg, that is Landesbank, Bürgschaftsbank BW). Please contact the guarantor bank responsible for your company in case you want additional information and contact details.


In particular, the current guarantee terms and conditions have been changed against the background of the COVID-19 crisis as follows:

  • The maximum guarantee amount has doubled to EUR 2.5 million.
  • The ceiling on the share of operating resources in the total exposure of the guarantor bank has been increased to 50-80 percent.
  • Guarantor banks are allowed to make independent decisions regarding amounts up to EUR 250,000 within three days.
  • The large guarantee programme will also be opened for companies outside structurally less developed regions.


Documents that are typically requested for the decision:

  • Annual financial statements for 2018, preliminary figures for 2019/Management Analysis including a trial balance, and an informative calculation of capital requirements;
  • Liquidity plan and profitability forecast (usually for guarantees > EUR 250 thousand);
  • Voluntary self-disclosures.

Financing assistance from the State of Baden-Württemberg

1. grants for small enterprises during the Covid-19 crisis

The state of Baden-Württemberg will provide direct aid for small and micro enterprises with up to 50 employees operating in any industry or segment. It will be possible to apply for a grant beginning on 25 March 2020. Depending on the graveness of each individual case, this “hardship fund” will give grants of up to EUR 30,000 (instead of EUR 15,000 previously), which do not have to be repaid.


Further information on Soforthilfe Corona (Emergency Aid in Covid-19 Crisis) can be found on the website of the Ministry of Economy, Labour and Housing Construction of Baden-Württemberg.


2. investment fund of the state of Baden-Württemberg

The state of Baden-Württemberg intends to set up an investment fund for small and medium-sized companies in order to strengthen the equity of companies important for the economy, which are actually healthy, but in a grave situation currently because of the Covid-19 crisis. The aim is to enable Mittelstand-shaped companies with a key economic function to restore their liquidity and creditworthiness in order to survive the Covid-19 crisis.


3 L-Bank Programme

A broad range of financing offers from L-Bank (Landesbank) to cover short-term liquidity requirements has also been developed as a result of the Covid-19 crisis. Applications should be submitted in each case in accordance with the so-called “house bank principle”. Some of the L-Bank loan arrangements provide for a repayment bonus. In case of the current promotional loans from L-Bank, a 12-month suspension of repayment can be granted based on a free-form application. The hotlines of L-Bank are available for information and advice to companies operating in Baden-Württemberg.




Guarantee coverage and export loan guarantees

If your company has international operations and its export transactions are secured with guarantees of Hermes or any other government-supported provider of export financing services, these will also apply in part to losses caused by the Covid-19 crisis. This applies to losses at the manufacturing stage falling within the scope of the manufacturing risk coverage. Manufacturing risk coverage provides protection against the financial consequences of a stoppage in the production cycle. Coverage often extends also to failure of deliveries; it is known as supplier credit coverage, or debt coverage. These coverage types offer protection in case a foreign customer defaults payment of a receivable – but this receivable must actually exist. In certain circumstances, losses caused by the Covid-19 crisis can be treated as a force majeure event invalidating the claim. Prompt action should be taken in case of a delay in payment.


Reliefs regarding the insolvency filing obligation

Due to a sudden and dramatic decline in orders and sales as a result of the Covid-19 crisis, Management may become obliged by law to file for initiation of the insolvency procedure, because an omission to do so is generally punishable. If they are already under an obligation to file for insolvency in the coming days or weeks, the German Federal Government intends to grant the affected companies and businesses more room for manoeuvre in this respect as well. For example, the German Federal Minister of Justice stated in a press release on 16 March 2020 that a legal regulation is planned to suspend the obligation to file for insolvency, similar to the flood damage situations of 2002, 2013 and 2016. We expect significant relief to be announced in this respect in the coming days.  

 How we can help

Covid-19 Management Team and Corona Impact & Solution Monitor

In view of the current emergency situation, we are at the disposal of our clients and companies with the Covid-19 Management Team at our Stuttgart office. In particular, our Impact & Solution Monitor offers the possibility of checking on and monitoring the effects together with our clients worldwide and on a daily basis in a centralised way from Germany and in cooperation with our foreign offices. Please contact us at:

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