As expected, the German government has agreed with the federal states on a further extension of a lockdown for retailers that sell non-essential products until Feb. 14. In response to requests made by fashion and sports retailers that are heavily dependent on the sale of winter products, especially seasonal clothing and footwear, it has made further concessions in terms of financial aid, while respecting European guidelines for such subsidies.
The conditions set for German retailers to obtain the federal government’s compensation for lost sales between November 2020 and June 2021 have been improved and extended to bigger companies, placing the upper limit for the annual turnover at €750 million, as long as they lose at least 30 percent of their sales because of the lockdown.
For example, companies that lose 90 percent of their sales in a specific month will get a subsidy amounting to 70 percent of store rentals, investments in digitalization and other fixed costs in that particular month. In addition, the amounts spent for the purchase of unsold seasonal products - for example winter clothing or footwear– are now allowed for the first time to be written off as fixed costs, as long as the company did not make a profit in 2019.
It was also decided to extend for the third time the deadline for an insolvency filing beyond Jan. 31 until the end of April. However, the exemption will only apply to companies that have run into payment difficulties due to the coronavirus and are still waiting for aid money.