Excise duties: liquidity support to mitigate the economic impact of the corona pandemic

Package of measures by the Federal Government to mitigate the economic impact of the Corona crisis

On March 13, 2020, the Federal Ministry of Finance and the Federal Ministry of Economics and Energy announced a far-reaching package of measures to cushion the economic impact of the corona virus SARS-CoV-2. The aim is to protect jobs and support companies. Companies and businesses are to be provided with sufficient liquidity to enable them to come through the crisis well. Specifically, the Federal Government wants to meet the corona pandemic economically affected companies with a liquidity-saving tax enforcement. In this context, deferrals, reductions in advance payments and the waiver of enforcement measures will be approved in an unbureaucratic manner.

Emergency aid in the field of excise duties

Emergency measures also apply to excise duties administered by the customs administration (e.g. energy tax, electricity tax, alcohol tax and air transport tax). The federal government has instructed the Directorate General of Customs to accommodate taxpayers in an appropriate manner to avoid undue hardship. The customs administration published a special report on 18.03.2020 on the measures to be taken.

Accordingly, companies affected by the effects of the Corona crisis can now contact their responsible main customs office. They can apply for tax deferrals, a deferral of enforcement and the adjustment of previously fixed advance payments, e.g. as electricity or natural gas suppliers. In order to ensure that the application is processed quickly, the applications must be substantiated and the connection to the Corona crisis has to be credibly demonstrated. The main customs offices are instructed to process the applications in an accommodating manner. The customs administration has not yet provided official forms for the application for liquidity assistance.

Applications for deferral for taxpayers demonstrably and not inconsiderably affected by the damage caused by the corona pandemic can be submitted until 31.12.2020.  The taxes must already be due or become due by this date. Applications for deferral of taxes due after 31.12.2020 must be specially justified.

If taxpayers are currently threatened with enforcement measures, the enforcement debtors can also apply for a deferral of enforcement, explaining their current situation and the connection with the Corona pandemic.

Taxpayers who are demonstrably and not insignificantly affected by the effects of the Corona crisis can apply for an adjustment of the previously determined advance payments until 31.12.2020, stating their circumstances.

EU state aid control for state aid measures

Due to the current emergency situation, the promised aid will generally flow quickly. However, it is quite conceivable that once the situation has eased, an orderly control of aid will be carried out. The European Commission examines the admissibility of state aid measures, particularly in light of the criterion of selectivity. As part of European primary law, EU state aid law takes precedence over national tax laws and administrative rulings. The European Commission can reclaim unlawfully granted state aid up to 10 years after it was granted, irrespective of national assessment periods.

State aids that distort or threaten to distort competition are principally incompatible with the internal market. Subsidies to repair the damage caused by natural disasters or other exceptional occurrences may be compatible with EU law.

Effects on tax concessions when a company is classified as a firm in difficulty

In addition to the question of whether the agreed emergency aid measure itself constitutes unlawful aid, it should be noted that, as a condition for benefiting from tax concessions on energy and electricity tax, companies must already give assurances that they are not in financial difficulty at the time of application.

With effect from 01.01.2017, the customs administration introduced the self-declaration on state aid on official form 1139. This form must be submitted when applying for numerous tax concessions. For example, the tax relief for companies in the manufacturing sector according to §§ 9b, 10 StromStG or §§ 54, 55 EnergieStG are affected. The official form 1139 is intended to ensure that companies in economic difficulties no longer receive tax concessions and are not kept alive solely on the basis of tax concessions.

In order to instrumentalise the requirements under state aid law, the European Commission has defined the term "firm in difficulty". It should be noted here that these criteria may usually arise well before the company is ready for insolvency. For example, limited liability companies are no longer eligible if half of the subscribed share capital has been lost as a result of accumulated losses. The granting of rescue aid can also lead to the status of a firm in difficulty.

As a result, the granting of national emergency measures due to the coronavirus crisis leads to interactions with European state aid law. Against this background, it remains to be hoped that a distinction will be made between agreed emergency aid measures due to the coronavirus crisis and other requirements under state aid law. The present emergency measures must be considered as permissible aid to repair the damage caused by natural disasters or other exceptional occurrences and thus not lead to a reduction in the volume of relief or tax exemption. Coordinated action by the Federal Government and the European Commission is therefore necessary in order to react appropriately to the present exceptional situation and to effectively mitigate the economic effects of the crisis.

If companies are concerned that the coronavirus crisis could lead to economic difficulties in the near future, we urgently recommend that all applications for relief for outstanding periods be processed with the highest priority now. The background for this is the current regulations in the Energy and Electricity Tax Act and the defence against disadvantages for these companies.