For Entrepreneurs and Legal Professionals
This guide offers an in-depth explanation of the German Corona-Überbrückungshilfen system, designed for English-speaking entrepreneurs and legal professionals unfamiliar with German law. It combines a detailed overview, practical advice, and legal considerations, including recourse options for those facing challenges with audits, appeals, or repayment demands.
Table of Contents
- Overview of the Corona Bridging Aid System
- What is the Bridging Aid program?
- Why is a Schlussabrechnung (final accounting) required?
- Key terms: A glossary for entrepreneurs and legal professionals.
- Application and Compliance: What You Need to Know
- Eligibility and conditions.
- Deadlines and required documentation.
- Common challenges during the application phase.
- Understanding Final Accounting (Schlussabrechnung)
- What it is and why it matters.
- Who must submit a final accounting?
- Consequences of non-compliance with deadlines.
- Audit Practices and the Total Reservation Clause (Totalvorbehalt)
- How authorities approach audits.
- The controversial Totalvorbehalt: Legal and practical implications.
- Appeals and Legal Recourse
- Tips for preparing for legal challenges.
- Frequently Asked Questions (FAQs)
- Addressing the most common concerns from entrepreneurs and legal advisors.
1. Overview of the Corona Bridging Aid System
What Is the Bridging Aid Program?
The Corona-Überbrückungshilfen program was a German government initiative to support businesses during the COVID-19 pandemic. Introduced in 2020, its goal was to provide financial assistance to companies that experienced significant revenue losses due to government-mandated lockdowns, supply chain disruptions, or other pandemic-related challenges.
This aid was designed as a temporary bridge to help businesses cover their fixed costs, such as rent, utility bills, and insurance premiums, during periods of reduced income. Unlike direct loans, the aid was non-repayable, provided applicants met the program’s strict eligibility criteria.
Phases of Bridging Aid:
The program evolved through several phases:
- Bridging Aid I-IV (2020-2022): Covering the early to late pandemic periods.
- November/December Aid: Specific programs compensating for the second lockdown in late 2020.
- Neustarthilfe (Restart Assistance): Tailored for self-employed individuals.
Each phase had unique eligibility requirements and funding limits, adding complexity to the application and compliance process.
Why Is a Final Accounting (Schlussabrechnung) Required?
The Schlussabrechnung is a mandatory final review of all funds received under the program. It ensures that:
- The applicant met the program's eligibility criteria.
- The amount of aid granted corresponds to actual revenue losses and fixed costs incurred during the eligibility period.
Initially, aid applications were often based on estimates or projections. The final accounting provides the government with a mechanism to verify these estimates against actual financial data.
Key Points About Final Accounting:
- Submission Deadline: Businesses must submit the Schlussabrechnung through their prüfender Dritter (a third party, typically a tax advisor or accountant). Missing this deadline can result in full repayment demands.
- Audits: Every Schlussabrechnung is reviewed by the granting authorities, some of which apply particularly stringent criteria.
- Consequences of Errors or Non-Compliance: Errors or a failure to submit final accounting may trigger repayment demands or, in some cases, allegations of subsidy fraud.
Key Terms: A Glossary for Entrepreneurs and Legal Professionals
Understanding these terms is crucial to navigating the system:
- Corona-Überbrückungshilfen (Corona Bridging Aid): The government-funded program offering financial assistance to businesses affected by the pandemic.
- Schlussabrechnung (Final Accounting): The mandatory final declaration to verify eligibility and determine the final amount of aid received.
- Prüfender Dritter (Third-Party Auditor): A professional (e.g., tax advisor) responsible for submitting applications and final accounting on behalf of businesses.
- Bewilligungsstelle (Granting Authority): Regional or state-level offices responsible for reviewing applications and issuing funds.
- Totalvorbehalt (Total Reservation Clause): A controversial legal provision allowing authorities to reassess and reclaim funds, even after initial approval.
- Widerspruch (Appeal): The administrative appeal process for challenging repayment demands or adverse decisions.
- Klage (Legal Complaint): A court proceeding initiated when an appeal is rejected or unavailable.
- Neustarthilfe (Restart Assistance): A specific aid program for self-employed individuals and small businesses.
2. Application and Compliance: What You Need to Know
Eligibility and Conditions
To qualify for Corona-Überbrückungshilfen, businesses mainly needed to meet the following criteria:
- Revenue Loss: Demonstrate a significant revenue decline (e.g., 30% or more) compared to a reference period.
- Fixed Costs: Have fixed operating costs eligible for reimbursement under the program.
- Business Status: Be a business or self-employed individual registered in Germany before a specified date.
Documentation Requirements
Applicants were required to provide comprehensive documentation, including:
- Financial records such as monthly turnover reports.
- Proof of fixed costs (e.g., invoices, rental agreements).
- Tax filings and bank statements.
The burden of proof lies with the applicant, meaning meticulous record-keeping is essential to avoid disputes during final accounting or audits.
Deadlines and Extensions
The German government set strict deadlines for the submission of applications and final accounting. For example:
- Initial Deadlines: Most programs required Schlussabrechnungen to be submitted by October 31, 2023 (Neustarthilfe even March 31, 2023).
- Extensions: Some applicants, upon request, received extensions until September 30, 2024.
Failure to meet these deadlines could trigger immediate repayment demands.
Common Challenges During the Application Phase
- Documentation Errors: Missing or incomplete records are the most common reason for disputes.
- Complexity for Groups: Companies within corporate groups (Unternehmensverbund) often struggled to clarify their eligibility, particularly in cases involving family ownership or cross-border subsidiaries.
- Technical Issues: Many applicants reported difficulties navigating the government’s online portals for application submission.
3. Understanding Final Accounting (Schlussabrechnung)
What It Is and Why It Matters
The Schlussabrechnung acts as a reconciliation process between the estimated aid amount granted and the actual aid amount justified by financial records.
Key Objectives of Final Accounting:
- Verify that businesses met the eligibility requirements.
- Identify and recover overpayments.
- Prevent subsidy fraud through detailed audits.
Who Must Submit a Final Accounting?
Not all applicants are required to file a Schlussabrechnung. Businesses fall into three main categories:
- Mandatory Submission: All businesses that received aid based on provisional approvals.
- Exempted Entities: Companies whose applications were fully rejected or never submitted.
- Corporate Groups: Only the main applicant within a group is typically required to submit.
Special Cases:
- Insolvent Businesses: Even if a company files for insolvency, the final accounting obligation remains. Responsibility shifts to the insolvency administrator.
- Individual Entrepreneurs Who Ceased Operations: Final accounting is still required, even if the business is no longer operational.
Consequences of Non-Compliance
Failing to submit a Schlussabrechnung can result in:
- Repayment Demands: Authorities may demand full repayment of all aid received.
- Legal Sanctions: In severe cases, failure to comply could be interpreted as fraud.
- Limited Recourse: Missing deadlines can eliminate opportunities to appeal or negotiate.
4. Audit Practices and the Total Reservation Clause (Totalvorbehalt)
How Authorities Conduct Audits
Every Schlussabrechnung undergoes detailed scrutiny by the regional granting authorities (Bewilligungsstellen). Unlike the initial application process—where automated tools (Dunkelverarbeitung) played a significant role—final accounting is reviewed manually.
Key Features of the Audit Process:
- Manual Review: Each Schlussabrechnung is examined in detail by human auditors.
- Cross-Checking Data: Auditors compare submitted financial records with third-party information, such as tax filings or government records.
- Focus on High-Risk Cases: Applications with large grant amounts (e.g., over €100,000) or discrepancies in documentation receive closer scrutiny.
Regional Differences in Practices:
- Certain states like Bavaria, Baden-Württemberg, and North Rhine-Westphalia apply stricter auditing criteria compared to others.
- Regions relying on large consulting firms audits tend to follow more meticulous and technical review processes.
Common Audit Red Flags
- Discrepancies in Financial Data: Mismatched turnover figures in tax filings and Schlussabrechnung records.
- Non-COVID-Related Declines: Authorities frequently dispute whether revenue losses were genuinely caused by the pandemic.
- Incorrect Categorization of Costs: Claiming ineligible expenses, such as personal expenses or capital investments, as fixed costs.
Practical Advice:
- Ensure consistency between tax returns, BWA (business management accounts), and submitted aid applications.
- Be prepared to justify why revenue declines were directly linked to the pandemic.
What Is the Total Reservation Clause (Totalvorbehalt)?
The Totalvorbehalt is a legal mechanism allowing authorities to reopen and reassess funding decisions, even after they were initially approved. This means:
- Final decisions on aid applications are not truly final.
- Authorities can retroactively alter their interpretation of rules, leading to revised eligibility assessments and repayment demands.
Legal and Practical Implications of the Totalvorbehalt
- Uncertainty for Businesses: Applicants cannot rely on initial approvals as guarantees of entitlement.
- Evolving Legal Standards: Authorities have reversed decisions based on new interpretations of eligibility criteria, even if the factual circumstances remain unchanged.
- Potentially Unlawful Practices: Legal experts argue that retroactive changes to approved applications violate principles of legal certainty and proportionality.
Examples of Totalvorbehalt in Action
- Corporate Groups (Unternehmensverbund): Authorities have retroactively declared corporate groups where none were initially assumed, impacting aid eligibility.
- Rejection of Fixed Costs: Previously accepted fixed costs, such as hygiene-related renovations, have been disallowed upon review.
- Disputes Over Seasonal Trends: Revenue drops initially attributed to COVID-19 were later deemed part of normal seasonal fluctuations, disqualifying applicants.
5. Appeals and Legal Recourse
Options for Challenging Repayment Demands
When facing repayment demands or adverse audit decisions, businesses can pursue two primary options:
- Filing an Administrative Appeal (Widerspruch):
- Must be submitted within one month of receiving the decision.
- Allows businesses to request a review of the decision by the granting authority.
- Typically involves presenting additional evidence or highlighting procedural errors.
- Initiating Legal Proceedings (Klage):
- If the appeal is denied or not possible (as in Bavaria), businesses can file a lawsuit in administrative court.
- Courts will independently assess whether the repayment demand complies with the law.
Important: In some German states, the appeal stage (Widerspruch) has been abolished, meaning businesses must proceed directly to court.
Practical Tips for Successful Appeals and Lawsuits
- Focus on Procedural Errors: Highlight any deviations from legal or procedural requirements by the granting authority.
- Use Comparative Cases: Show how similar cases were treated more favorably to argue unequal treatment (Gleichbehandlungsgrundsatz).
- Challenge the Total Reservation Clause: If authorities rely on the Totalvorbehalt, argue that retroactive changes to eligibility criteria violate legal certainty (Rechtssicherheit).
6. Further Frequently Asked Questions (FAQs)
Who is required to submit a Schlussabrechnung?
All businesses and individuals who received provisional approvals for Corona-Überbrückungshilfen must submit final accounting unless:
- The application was rejected or withdrawn.
- The aid was denied in full without partial approval.
What happens if I miss the deadline for submitting my final accounting?
Failure to meet the deadline can result in:
- Full repayment of all aid received.
- Possible legal action for subsidy fraud if authorities suspect intentional non-compliance.
In rare cases, authorities may accept late submissions, but this is not guaranteed.
How can I proe that revenue losses were caused by the pandemic?
- Provide detailed monthly revenue comparisons for the eligibility period versus the reference period (e.g., 2019 figures).
- Document pandemic-related factors, such as government-mandated closures or supply chain disruptions.
- Include third-party evidence, such as industry reports, showing the broader impact of COVID-19 on your sector.
Are there special rules for corporate groups (Unternehmensverbund)?
Yes. Only the main applicant in the group is responsible for submitting the Schlussabrechnung. However:
- Authorities may retroactively declare additional entities as part of the group, potentially reducing eligibility or triggering repayment demands.
Can I appeal a repayment demand?
Yes. You can file an administrative appeal (Widerspruch) within one month of receiving the demand. If unsuccessful, you may pursue legal action (Klage) in administrative court.
What types of costs are eligible under the program?
Eligible costs typically include among others:
- Rent or lease payments for business premises.
- Utilities, such as electricity, water, and internet.
- Insurance premiums.
- Pandemic-related hygiene measures (e.g., partitions, sanitization).
Authorities may disqualify ineligible costs, such as personal expenses or capital investments.
What is the Totalvorbehalt, and how does it affect me?
The Totalvorbehalt allows authorities to reopen and reassess funding decisions even after initial approval. This means businesses cannot fully rely on earlier approvals, as authorities may retroactively change their interpretation of eligibility criteria.
Dennis Hillemann
Tanja Ehls