The restrictive measures taken to avoid the spread of the Covid-19 have led, among other things, to the complete or partial closure of many businesses operating in many sectors. Although many restrictions are gradually easing, many companies are still not allowed to open or they are re-opening with many restrictions. The most affected are companies linked to the business of major events (such as: companies that deal with logistic events, catering and organization of fairs, showmen, clubs, bar), but also hotels, non-profit associations (such as: facilities for the disabled or inclusion companies), as well as professional sports clubs in the lower leagues.

The main goal of the bridge aid is therefore to provide small and medium-sized enterprises (directly or indirectly affected by the Covid-19 crisis) with wider assistance in terms of liquidity for the months from June to August 2020, for helping them to not go to bankrupt. The Federal Program provides grants in the form of capital payments at fixed operating costs for small and medium-sized enterprises with high pandemic-related turnover losses. Particularly affected sectors are taken into account through a graduated support system, which provides for a proportionately higher acquisition of fixed operating costs in the event of particularly high turnover losses.

 

Key elements of the bridge aid Program:

 

Purpose of the Aid Program
To ensure the survival of small and medium-sized enterprises which suffer a significant loss of turnover due to total or partial closures or conditions imposed by the Covid-19 measure.

 

Duration of the Aid Program
The Aid Program will run from June to August 2020 and a grant may be awarded for a maximum of three months.

 

Who can apply
The applicant must not have been in difficulties on 31st December 2019 as defined by the EU rules.

Companies and organizations (operating in all economic sectors) insofar they are not eligible for the Economic Stabilization Fund and insofar as they had to completely or partially cease their activities due to the Covid-19 crisis.

Self-employed persons and freelancers who carry out their freelance work as main job are also entitled to apply. A total or partial cessation of activity following the Covid-19 crisis is assumed if turnover in the months of April and May 2020 as a whole has decreased by at least 60% compared to April and May 2019. For companies founded after April 2019, November and December 2019 should be used for comparison instead of April and May 2019.

Companies and non-profit organizations affected by the Pandemic crisis, regardless of their legal form, which are permanently economically active on the market (e.g. youth training centers, inter-company vocational training centers, family holiday centers) may also apply. For these companies and organizations, the focus is on income (including donations and membership fees) rather than turnover. Public enterprises are excluded from this Aid. This does not apply to educational institutions of self-government of the economy in the legal form of public law companies (chamber educational institutions, district craft associations or corporations).

The grants must be reimbursed if the company does not continue until August 2020. Grants cannot be paid out to companies that have ceased activity or filed for bankruptcy. The deadlines for applications will expire on 31 August 2020 and the deadlines for payments on 30 November 2020 at the latest.

 

Eligible costs
Continuous, contractually justified or officially determined fixed costs which are not unilaterally modifiable, which accrue during the financing period are eligible on the basis of the following list (which also takes account of the specific characteristics of the sector):

  • rentals and leases of buildings, land and premises directly related to the company’s business. Costs    for private premises are not eligible;
  • other rental costs;
  • interest on loans and mortgages;
  • share of financing of leasing payments;
  • the expenses for the necessary maintenance, assistance or storage of real estate and rented property, including IT expenses;
  • expenses for electricity, water, heating, hygiene measures;
  • property taxes;
  • operating license rights;
  • insurance, subscriptions and other fixed costs;
  • costs for tax advisors or auditors incurred in connection with the Covid-19 claim for bridge Aid;
  • costs for trainees;
  • staff costs during the period of eligibility which are not covered by the part-time work allowance shall be subsidized at a flat rate of 10 per cent of the fixed costs referred to in points 1 to 10. The cost of living or salary of an employer shall not be eligible;
  • in order to take into account the considerable concern of travel agencies, the fees that travel agency owners have reimbursed to Tour Operators due to cancellations for Covid-19 are also considered as fixed costs under numbers 1 to 12.

The fixed costs referred to in points 1 to 9 must be justified by 1 March 2020. Payments for fixed costs made to affiliated companies or to companies owned or controlled directly or indirectly by the same person or company shall not be eligible.

 

Type of grants and calculation of the amount
The bridge aid allowance reimburses a share of:

  • 80% of fixed costs with a drop in turnover of more than 70%;
  • 50% of fixed costs in the event of a drop in turnover of between 50 and 70%;
  • 40% of fixed costs in the event of a drop in turnover of between 40 and 50% compared to the same month in the previous year.

For companies established after June 2019, the months December 2019 to February 2020 should be taken into account for comparison. If the turnover in the financing month is at least 60% of the turnover in the same month of the previous year, the transitional allowance is cancelled proportionally for the respective month of financing.

Benefits received as a transitional allowance under the above conditions are taxable and must be taken into account in determining profit in accordance with general tax provisions. Any overcompensation must be reimbursed.

 

Maximum contribution
The maximum contribution is 150.000€ for 3 months. For companies with up to five employees the maximum amount of reimbursement is 9.000€ for 3 months, for companies with up to ten employees the maximum amount of reimbursement is 15.000€ for 3 months.

These maximum repayment amounts may be exceeded only in exceptional and duly justified cases. There is a duly justified exceptional case if the bridging aid based on eligible fixed costs is at least twice the maximum reimbursement amount. In such cases, 40% of the fixed costs not yet taken into account in addition to the maximum amount of repayment shall be reimbursed to the applicant, provided that the holding suffers a loss of turnover of between 40% and 70% in the month of support. In the case of sales losses of more than 70%, 60% of the fixed costs not yet taken into account are reimbursed. The maximum amount of €150,000 for three months remains unchanged.

For example: a showman with 10 employees and a loss of turnover of over 70% during the support period has:

  • a) 10 000€ of fixed costs: the bridging aid is 8 000€;
  • b) 20.000€ of fixed costs: the bridging aid is 15.000€. The arithmetic claim for reimbursement of 80% of fixed costs (=€ 16.000) is reduced to the maximum reimbursement amount;
  • c) 50.000€ fixed costs: the hedge fund amounts to 33.750€, as a justified exception is made. The fixed costs are reimbursed at 80% until the maximum reimbursement amount is reached (18.750€ x 0,8 = 15.000€). The portion of fixed costs not included here is reimbursed at 60% (31.250€ x 0,6 = 18.750€).

Legally independent subsidiaries or companies that are owned or (directly or indirectly) under the influence of the same person or company may only request bridging assistance up to a total amount of €150,000 for 3 months. This consolidation requirement does not apply to non-profit accommodation facilities such as youth hostels, rural school hostels, international youth exchange institutions, institutions for the disabled, etc.

 

Proof of loss of turnover
The number of employees is based on the number of full-time employees working in the company on the 29th of February 2020. In the case of subsidiaries, the employees of the individual companies are included together.

Proof of loss of turnover and reimbursable fixed costs is provided in two phases. In the first phase (application), the requirements of the application and the amount of the reimbursable fixed costs must be proven with the help of a tax consultant or an auditor, in the second phase (subsequent proof) with the help of a tax consultant or an auditor.

First phase :

Collapse of turnover: companies present an estimate of their turnover in April and May 2020 at the time of submitting the application. They also provide a forecast of their turnover for the requested financing period.

Fixed costs: Upon request, companies provide an estimate of the expected fixed costs for which reimbursement is requested.

The application procedure is carried out by a tax advisor or auditor and transmitted directly to the IT systems of the approval offices of the federal states via a digital interface. Only then can approval be granted.

As part of the application procedure, the tax advisor or auditor takes into account the VAT returns for 2019, as well as the annual budget for 2019 and the tax return or corporation tax for 2019. If the annual budget for 2019 or other required key figures are not yet available, the annual budget for 2018 or other required key figures from 2018 onwards may be submitted.

Second phase:

Collapse of turnover: once the final figures for actual turnover in April and May 2020 are available, a tax advisor or auditor will send them to the relevant federal authorities. If it turns out that the 60% drop in sales has not been achieved, contrary to forecasts, any subsidies already paid out must be reimbursed. In addition, once the final turnover figures are available, the tax advisor or auditor will inform the approval offices of the Federal Länder of the actual drop in turnover in the respective month of financing. This notification can also be made after the end of the program. If this results in deviations from the sales forecasts, any overpaid subsidies must be reimbursed or reinstated retroactively.

(The tax consultant or auditor shall take account of the advance VAT returns of the applicant companies when confirming final VAT payments).

Fixed costs: Tax consultants or auditors also submit the final statement of fixed costs to the approval agencies of the Länder. This notification can also be made at the end of the program. If this results in deviations from the cost estimates, any grants already paid must be reimbursed or will be increased retroactively.

 

Aid scheme
The Bridge Aid Program is part of the amended Federal Small Grants Regulation 2020. The use of bridge aid and other emergency aid provided by the Federal Government and the Länder must not exceed the maximum amount allowed under the Small Grants Regulation 2020, possibly cumulated with the maximum amount of aid under the De Minimis Regulation (De Minimis Verordung).

 

Combination and relationship with other programs
The bridging aid program follows on from the federal government’s emergency aid program. Financial difficulties that arose before the program entered into force (March to May 2020) will not be compensated. Companies which have benefited from emergency aid from the Federal Government or the Federal Länder but which continue to suffer losses in turnover to the extent mentioned above may apply again. The use of emergency aid does not preclude the simultaneous recourse to bridge aid, but if the period of eligibility overlaps, the emergency aid will be counted in proportion to the period of eligibility. Fixed costs may only be reimbursed once. A corresponding self-declaration must be submitted by the companies when submitting the application. Details on the relationship of the bridging aid with other Covid-19 federal and state subsidy programs are set out in the instructions for implementing the administrative agreements with the German Länder.

 

Regulation on relations with non-cooperative jurisdictions
Applicant companies must confirm in a statement of commitment that neither bridging assistance will flow into tax havens, nor other transfers of profits will be made to these jurisdictions and that they will ensure tax transparency. This will be coordinated with the relevant regulations for the Economic Stabilization Fund (WSF). The details will be set out in the implementation notes.

 

Program Volume
The volume of the program is set at a maximum of EUR 25 billion and corresponds to the estimated costs for the program up to and including August 2020. This estimate is the result of calculations made by the Federal Ministry of Economy and Energy on the basis of data from the Business Statistics Register. As statistical data on the expected decrease in turnover are not yet available, the calculations were based on data from a survey conducted by the Kantar Institute on behalf of BMWi on how German companies were affected by the Pandemic.

72% of companies surveyed expect a drop in turnover in the second quarter as a result of the current crisis, 9% of these companies expect a drop in turnover between 51% and 75%. 28% of companies surveyed estimate a drop in turnover from 76% and up. If these figures are converted into the total of all companies surveyed, the proportions are 6.5% and 20.2% respectively. For further calculations, it was assumed that the shares of the companies forecasting a drop in sales would be evenly distributed.

Basically, in the second quarter: 21.5% of companies estimate a drop in sales of more than 70% (corresponds to 80% reimbursement of fixed costs); 2.6% of companies expect a drop in sales between 60 and 70% (corresponds to 50% reimbursement of fixed costs); the remaining 75.9% of companies will register a drop in turnover, which will be less than 60% in April and May 2020 and they will not receive any bridging aid.

The estimate is subject to great uncertainty because it depends very much on the further course of the pandemic and its impact on the economy. In particular, the increase in sales due to the easing of Covid-19 measures until August 2020 should significantly reduce the volume of the program.