M&A COVID-19 Wire XVIII
1. State Aids
On 21 January 2021, the EU Commission approved extraordinary economic aid for amounts in excess of EUR 4 million. Previously, an elaborate individual notification was required.
According to the German Federal Ministry of Economics and Energy (BMWi), payments of the November financial aids and the advance payments for the December financial aids can start immediately. Applications can be submitted via the BMWi platform, see also FAQs.
The application timelines for Überbrückungshilfe II have been extended to 31 March 2021 and for November and December financial aids to 30 April 2021. In addition, Überbrückungshilfe III is to be revised and simplified.
2. Restructuring and Insolvency Law
Since 1 January 2021, the new Act on the Further Development of the Law on Restructuring and Insolvency (SanInsFoG) is in force, which has made far-reaching changes in the area of Insolvency Law.
- Implementation of a stabilisation and restructuring framework for companies (StaRUG) as a pre-insolvency alternative to formal insolvency proceedings. Restructuring measures can be implemented also against the resistance of minorities through a restructuring plan.
- Suspension of the obligation to file for insolvency from 1 January to 31 January 2021 for companies that have filed for financial aids in the period from 1 November to 31 December 2020 provided in state aid programs to mitigate the consequences of the COVID-19 pandemic. An exception exists especially if there is no prospect of obtaining the aid.
- Reduction of the forecast period for the over-indebtedness assessment in the period from 1 January to 31 December 2021 from twelve (deviating from Sec. 19 para. 2 German Insolvency Law) to four months if the over-indebtedness is caused by the COVID-19 pandemic.
- Extension of the maximum insolvency application period for over-indebtedness from three to six weeks (Sec. 15 para. 1 sentence 2 Insolvency Law).
Further information on the SanInsFoG can be found here.
3. German Tax Law
a) Application of Tax Relief Measures extended
Germany took extensive measures in 2020 to mitigate the serious economic effects of the COVID-19 pandemic. By circular of 22 December 2020, the German Federal Ministry of Finance extended the application of certain tax relief measures:
- Deferral of tax payments until 30 June and, in general, further deferral beyond this date and until 31 December 2021 at the latest if taxpayer agrees on installment payments;
- Waiver of enforcement measures until 30 June 2021;
- Reduction of advance tax payments in 2021;
This tax relief measures are only granted if the taxpayer is directly and not insignificantly affected by the COVID-19 pandemic and files a respective application until 31 March 2021 for a deferral of tax payments and/or a waiver of enforcement measures respectively until 31 December 2021 for a reduction of advance tax payments.
b) Retrospective Effect of Restructuring extended for 2021
Already in 2020, the German legislator has extended the retroactive effect of reorganisations under German restructuring law from a regular maximum of eight months to a maximum of twelve months. This measure was extended by legislative decrees of the German Federal Ministry of Finance and the German Federal Ministry of Justice and is effective for reorganisations until 31 December 2021. In general, this allows for reorganisations in 2021 with a maximum retroactive effect of twelve months for German tax purposes.
c) Further Extension of Filing Period for 2019 Tax Return ahead
The Federal Ministry of Finance has already announced on 1 December 2020 that the regular filing period for the 2019 tax return, which normally ends upon expiry of February 2021, will be extended by one month if the tax return is prepared by a tax advisor. The legislator now intends a further extension of the filing period. On 12 January 2021, the German Bundestag published a draft bill to extend the regular filing period by six months. Accordingly, the 2019 tax return would have to be filed by 31 August 2021 at the latest.
d) No Wages by Absorption of Costs for COVID-19 Test
On 28 December 2020, the Federal Ministry of Finance updated its COVID-19 FAQs and, in particular, clarified that costs for a COVID-19 test borne by the employer does not constitute taxable wages. The COVID-19 test and the absorption of the respective costs are rather in the employer’s own predominant interest. Therefore, wage taxes and social security costs should not arise.
4. COVID-19 Pandemic and Business Closure Insurance
As expected, lawsuits filed against insurance companies are still looming large. Meanwhile, there is a tendency to strict interpretation of business closure insurance clauses at the regional courts. Seven regional courts negated a compensation for business closure since our last COVID-19 Wire.
As a big insurance company settled two cases with its policyholders recently, it becomes clear that at least the regional court of Munich could decide differently in a given case. There are still no decisions by the German Supreme Court.
In contrast, there is more clarity regarding the main issues in Great Britain. On 15 January 2021 the British Supreme Court discarded in a test case several appeals against a decision made by the High Court, which adjudged insurance coverage under business closure policy to the policyholders. Therefore, the insurance companies are obliged to compensation without the necessity to bring about various individual case decisions by different courts.
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