M&A COVID-19 Wire XII

1. State Aid

• As of now, applications for the interim financial aid can be made online via this link (in German).
• We keep our overview "COVID-19 – State aid for affected companies" always up-to-date for you: State aid for affected companies (in German)

2. Update COVID-19 Law

• The Law to mitigate the consequences of the COVID-19 pandemic dated 27 March 2020 (COVID-19 Law) aimed to mitigate the significant consequences of the COVID-19 pandemic in the areas of insolvency, corporate, tenancy, lending and civil law.
• An overview of the most important regulations for (portfolio) companies can be found here.
• The new regulations of the COVID-19 Law are mainly limited in time:
  • The debtor’s obligation to file for insolvency remains suspended until 30 September 2020 in accordance with the COVID-19 Law. The suspension can be extended beyond 30 September 2020 until 31 March 2021 by decree of the German Federal Government. It is not yet foreseeable whether the option of an extension will be taken. The relaxations for payments by the management in the event of insolvency, the regulations on the subsequent challenging of credits and loans and the simplification and reduction of insolvency challenges remain also effective.
  • The COVID-19 Law has excluded for a period of three months the right of creditors to request the opening of insolvency proceedings pursuant to Section 14 of the German Insolvency Law, unless the reason for the opening of insolvency proceedings existed before 1 March 2020. This three-month period has expired on 28 June 2020. Therefore, companies have to expect an increased number of creditors' requests, especially if they have stopped payments. In order to eliminate the risk of a creditor's request as far as possible, companies in crisis should undertake restructuring efforts. Companies have the option to defer taxes and social security contributions, which should be considered as early as possible. The most of creditors' requests are made by social security institutions and tax offices.
  • The COVID-19 Law granted consumers and micro-entrepreneurs a right to refuse performance under certain circumstances until 30 June 2020 for obligations arising from material continuing obligations (in particular basic services such as electricity, gas and telecommunications). The German Federal Government has not taken the option provided in the COVID-19 Law to extend the right to refuse performance beyond 30 June 2020. From 1 July 2020, no further postponement of payments is foreseen.
  • The COVID-19 Law provides for a possibility of deferral for three months from the due date for claims of the lender for repayment and interest payments under consumer loan agreements concluded before 15 March 2020 and due between 1 April and 30 June 2020. Deferred payment obligations become due and payable at a later date, without an additional interest for the deferral. The lender's right of termination is excluded for the period of the deferral. For the period after 30 June 2020, no new deferral periods can commence and the COVID-19 Law provides for a mutual agreement between the parties. If such an agreement is not entered into, the term of the agreement is extended by three months and the due date of the performances is postponed by this period.

3. Second COVID-19 Pandemic Tax Support Law

• On 1 July 2020, a second law for the implementation of tax measures to mitigate the consequences of the COVID 19 pandemic (Second Corona Tax Support Law (in German)) entered into force.
• The law especially provides the following measures:
  • Reduction of VAT from 19% to 16% and from 7% to 5% from 1 July to 31 December 2020.
  • Due date of import VAT postponed to 26th day of the second month following the import.
  • Extension of tax loss carry back from EUR 1 million to EUR 5 million for the years 2020 and 2021.
  • The maximum tax incentive for research and development is doubled for the years 2020 to 2025.

4. German DAC 6 Reporting Deadlines will not be postponed

• The German Federal Minister of Finance rejects to opt-in for a postponement of the DAC 6 reporting deadlines by six months. This was quite unexpectedly announced at the Federal Press Conference on 6 July 2020.
• The EU member states had already agreed on the option of postponing the reporting deadlines by six months. The German Federal Ministry of Finance was even authorised to regulate the postponement in the First Tax Support Law (in German). Therefore, it is surprising that Germany is apparently not opting in.
• Please note: According to the current reporting deadlines, cross-border tax arrangements where the reporting obligation is triggered
  • between 25 June 2018 and 30 June 2020 (“old cases”) must be reported by 31 August 2020 at the latest,
  • as of 1 July 2020 (“new cases”) must be reported within 30 days.
• A draft of a circular letter of the German Federal Ministry of Finance dated 2 March 2020 (in German) provides that reportings subject to a deadline by 1 September 2020 will not be objected if they are filed by 30 September 2020 at latest. However, it seems unlikely that such provision would be implemented.
• A final circular letter is expected to be published in mid-July 2020.

5. Draft Law to shorten the residual Debt Discharge Procedure

• With regard to the shortening of the residual debt discharge procedure already announced in the economic stimulus package of 3 June 2020, the German Federal Government adopted an initial draft law on 1 July 2020. This law is intended to implement Directive 2019/1023/EU.
• The main undertaking is the shortening of the regular residual debt discharge procedure for entrepreneurs and consumers from currently six to three years in future. The shortening shall apply to all procedures requested from 1 October 2020. Transitional arrangements for insolvency proceedings filed on or after 17 December 2019 are foreseen. For consumers, the shortening of the residual debt discharge procedure shall be limited until 30 June 2025.
• The fulfilment of additional conditions previously required for a reduction of the residual debt discharge procedure, such as the coverage of procedural costs or the repayment of debtor liabilities in a certain amount, is dispensable according to the draft law.
• The draft law provides for extended obligations to surrender assets which the debtor acquires during the period of good conduct. It would also be possible to refuse discharge of residual debt if the debtor creates inappropriate liabilities during the period of good conduct.

If you have further questions, please contact us:

Nico Fischer – nico.fischer@pplaw.com
Tobias Jäger – tobias.jaeger@pplaw.com
Marco Ottenwälder – marco.ottenwaelder@pplaw.com
Nemanja Burgić – nemanja.burgic@pplaw.com
Matthias Meier – matthias.meier@pplaw.com