Fundamentals on the use of Corona emergency aid
As already known and explicitly explained in the equity-based decision (Billigkeitsbescheid) received by applicants, the Corona subsidy may only be used to cover financial operational bottlenecks such as bank loans, leasing instalments, business rents and similar obligations. The electronic approval notice transmitted after review of the application may also be presented to the bank. It serves as proof that the federal state will pay out the subsidy.
The emergency aid is, however, expressly intended in particular to bridge liquidity shortfalls that have arisen since 1 March 2020 in connection with the COVID-19 pandemic. Economic difficulties or liquidity shortfalls that arose before 1 March 2020 are not covered.
A direct prohibition on offsetting against existing credit lines also applies, which means that when the emergency aid is transferred, it must not automatically be used to service existing credit lines or other interest and repayment claims. The emergency aid must be used in full to compensate for the economic bottlenecks directly caused by the pandemic.
In principle, you may therefore use the subsidy exclusively to pay business costs or to settle business liabilities (rents, supplier invoices).
Any overcompensation must be repaid. Overcompensation arises if the applicant receives more in grants than the damage actually incurred — in particular the loss of turnover caused by the Corona crisis less any costs saved (e.g. rent reduction).
Newly introduced for solo self-employed persons, freelancers and owners of sole proprietorships and partnerships working in their business: lump sum for living expenses
Solo self-employed persons, freelancers and owners of sole proprietorships and partnerships working in their business may, on a one-off basis, apply a flat-rate amount of EUR 2,000 in total for the months of March and April for living expenses or a (notional) entrepreneur's salary.
Requirements:
- (Initial) application submitted in March or April 2020.
- No application for ALG II (basic income support) for March or April 2020.
- No application under the immediate aid programme for artists.
Accounting method: Inclusion of a one-off total amount of EUR 2,000 when calculating the liquidity shortfall in the proof-of-use statement. All grant recipients will receive a letter with a corresponding template and instructions on how to fill it in.
Important: Proof of how the subsidy was used is required
At the end of the approval period, all emergency aid recipients will be contacted and asked to check whether overcompensation has occurred.
The proof of use of the emergency aid is provided using a template which all recipients will receive in good time in a separate letter (including instructions for completion). The associated documents must be retained for 10 years.
All solo self-employed persons are therefore required to submit a declaration at the end of the three-month approval period. In it, they state whether they fully needed the NRW emergency aid to cover the liquidity shortfall caused by Corona. Otherwise, they must repay any aid received in excess. The regulation now adopted provides that they may apply EUR 2,000 for living expenses in this proof of use.
A precondition is that the applicants did not apply for ALG II in either March or April. This indirect grant from the federal state is also not granted if they have already received support from the immediate aid programme of the Ministry of Culture and Science for artists.
False statements constitute subsidy fraud
In the application form, the applicant confirms that all information has been provided to the best of their knowledge and belief and truthfully. False statements that lead to an unjustified receipt of the benefit constitute subsidy fraud. In that case, the benefit must not only be repaid; criminal prosecution may also follow.
The subsidy must be declared/taken into account in the 2020 tax return (income tax only, no VAT, i.e. not subject to VAT, as no exchange of services takes place here).
Frequently asked questions
Frequently asked questions
What may the Corona emergency aid be used for?
The Corona emergency aid may only be used to cover operating costs and liabilities, such as bank loans, leasing instalments, business rent or supplier claims. It is intended to bridge liquidity shortfalls that have arisen since 1 March 2020 in connection with the COVID-19 pandemic. Economic difficulties that already existed before this cut-off date are not covered.
What does overcompensation mean in the context of Corona emergency aid, and what are its consequences?
Overcompensation occurs when the applicant has received more in subsidies than the actual loss incurred, i.e. the revenue shortfall caused by the Corona crisis minus any saved costs. The excess amount must be repaid. At the end of the approval period, all recipients are contacted and must document the use of the funds using a standard form.
Are solo self-employed individuals allowed to claim a flat rate for living expenses?
Yes, solo self-employed individuals, freelancers, and owners of sole proprietorships and partnerships actively working in the business may claim a one-time flat rate of EUR 2,000 for the months of March and April to cover living expenses or a notional entrepreneur's salary. Requirements are: an initial application filed in March or April 2020, no claim for ALG II (unemployment benefit II) for these months, and no use of the emergency programme for artists.
How long must records on the use of Corona emergency aid be retained?
All records substantiating the use of the emergency aid must be retained for 10 years. The proof itself is provided via an official form, which recipients will receive in good time together with completion instructions.
How is the Corona emergency aid treated for tax purposes?
The Corona emergency aid must be reported as operating income for income tax purposes in your 2020 tax return. No VAT is due, as there is no exchange of services and the subsidy is therefore not subject to VAT.
What are the consequences of false statements in the application for Corona emergency aid?
False statements leading to an unjustified receipt of emergency aid qualify as subsidy fraud. In addition to repayment of the funds, criminal prosecution may follow. In the application form, the applicant expressly affirms that all information has been provided truthfully and to the best of their knowledge.