Taxes & business banking for the self-employed


Freelancers & Self-Employed: What is the Corona ''Restart Aid'' and how can you access it?

Kate Bailey

Freelance Editor

Apr 7, 2021

Freelancers and self-employed people who have been impacted by the Corona crisis are able to breathe a sigh of relief after the Neustarthilfe was announced and with good reason: many conditions of the Bridging Aid III meant that the solo self-employed and freelancers were unable to receive assistance. The ‘’restart aid’’, as it is best known in English, factors in these conditions. So, what are the details and how can you access this aid if you need it?

Earlier this year it was made clear different kinds of support would be available for different kinds of businesses but in general, the specific route to access this help was unclear. At the time, many freelancers and solo self employed people were understandably frustrated by the lack of clarity around help specific to them but in retrospect, it is clear this was so the government could effectively establish the processes, procedures and very nuanced questions that were bound to arise from arranging this kind of support. Now we have been given an extensive explanation of the help and some detailed questions and answers.

As per Germany, it’s a lot. But, it is also not as complicated as all the big words make it out to be. We have compiled the nuts and bolts of the Restart Aid in this article with the hope it is helpful towards your understanding of your eligibility and how to take first steps. It should be noted however, for any open questions it is best to contact the government body responsible for your area, the Finanzamt or a tax consultant if you have access to one.

So, what is Restart Aid?

The new restart aid supports self-employed people whose economic activity is restricted due to Corona in the funding period from January 1 to June 30, 2021. It supplements the existing security systems, such as the basic security. Self-employed persons who do not make use of the reimbursement of fixed costs under bridging aid III can receive 50 percent of a reference turnover generated in the comparison period as a one-off support service (restart aid). The restart assistance amounts to a maximum of 7,500 euros.

And, how does it work in terms of cash in hands?

In a first step, the restart aid is paid out as an advance payment before the actual sales in the funding period are determined. Only after this has expired, i.e. from July 2021, will the amount of the restart aid to which the solo self-employed are entitled will be calculated on the basis of the finally realized sales for the months January to June 2021. The self-employed person may keep the full amount of the restart aid granted as an advance if he or she has lost more than 60 percent in sales.

If the loss in sales is lower, the restart aid must be repaid (proportionally). It is therefore to be understood as a liquidity advance, which must be repaid (proportionally) in the event of a positive course of business for the self-employed person. Actors and other artists who only have short-term engagements and short-term contracts are in a similar situation to self-employed solo workers. With the lockdown for theatres and stages, your potential employers are closed.

As part of the restart assistance, short-term employment relationships (with a duration of up to 14 weeks) in the performing arts and non-permanent employment relationships (with a duration of up to seven consecutive calendar days) in the comparison period can be taken into account. The prerequisite for this is that the applicant did not receive any unemployment benefit or short-time work allowance for January 2021.

Hmm, that last part seems complicated - who can actually apply? 

Self-employed persons from all sectors are generally eligible to apply for the restart assistance if they work as self-employed as your main occupation, i.e. the majority of the total of your income (at least 51 percent) comes from a commercial (§ 15 EStG) and/or freelance (§ 18 EStG) activity, and:

  1.  employ less than one salaried employee (full-time equivalent) ( see 2.5 ),
  2. are recorded by a German tax office for tax purposes,
  3. do not claim any fixed costs in bridging aid III and
  4. started their self-employed business before May 1, 2020

You are excluded from receiving this help if you: 

  1. were already in (economic) difficulties as of December 31, 2019 (EU definition 3 ) and have not overcome this status afterwards 4 ,
  2. have ceased their business activities permanently or have applied for or opened national insolvency proceedings.

The old two-step tango...

The government has created an advance payment system for this Restart Help, which essentially involves a person receiving the money as an advance. Essentially, after submitting your application, you will receive the restart aid as an advance. After the end of the funding period (from July 2021), you will prepare a final statement and state the sales you have achieved in the first half of 2021.

This will check whether you can keep the advance payment in full (the advance payment then becomes a grant), or whether you have to repay all or part of the advance payment. That depends on how badly your business was affected by the corona pandemic. It’s complicated, but fair. The more your business suffered from the corona pandemic in the first half of 2021, the less you will have to repay the restart aid. Self-employed people who only achieved 40 percent of the reference turnover in 2019 or even less in the first half of 2021 can keep the advance payment in full and do not have to repay anything.

What counts as reference turnover?

The simple answer is your entire 2019 sales minus VAT, divided by 12 and multiplied by 6. This is essentially giving you a monthly average revenue, and allowing its multiplication of half a year to act as your reference sales. Simply put: you generate sales of 24,000 EUR per year. You divide that by 12 (2,000 EUR) and you multiply by six - meaning your reference sales are 12,000 EUR - of which you are eligible to claim restart help of 6,000 EUR.

For those who were not operational in the year 2019, or who began activity from January 1, 2019 and April 30, 2020 have a different set of rules for calculating their reference sales. There are three options of a timeframe to be used for this:

  1. the average monthly sales over all full months of business activity in 2019 (reference period: January 1, 2019 (or later) to December 31, 2019).
  2. the average monthly sales in the two months before the crisis, January and February 2020 (comparison period: January 1, 2020 to February 29, 2020)
  3. or the average monthly turnover of the 3rd quarter 2020 (comparison period: July 1, 2020 to September 30, 2020)

The sales of January and February 2020 can only be taken into account for the calculation of the reference month if the self-employed persons were self-employed on all days in both months, i.e. the self-employed activity was started before January 1, 2020. Self-employed people who have started their own business on May 1st, 2020 are not eligible to apply. The date on which the self-employed activity was registered with the tax office counts as the date for starting self-employment. 

Are you limited to what you can use the restart aid for?

No, there are no guidelines for using the restart help. The new start aid supports self-employed people whose economic activity is restricted due to Corona in the funding period from January 1 to June 30, 2021. This is to secure their economic existence. The restart aid is aimed particularly at self-employed people who have only low operational fixed costs and for whom the fixed cost reimbursement under Bridging Aid III is therefore out of the question.

For this reason, the calculation of the restart aid is only based on the sales in the comparison period and in the funding period, but not the operating costs. The use of the restart aid does not have to be proven.

That said, this help will be considered income and will count towards your overall income declaration for 2021. Which is to point out: be sure that this money is being used for business purposes and expenses, because obviously, when you do this you reduce the tax burden on the income - which is exactly how the system is meant to work.

Gotcha. What’s the deal with applying?

Self-employed persons can use the one-time restart assistance as a natural person in their own name directly via the online tool on the site direct. The ELSTER certificate of the natural person known from the tax return is used for identification. If you do not yet have such a certificate, you can apply for it via the ELSTER portal. The advance payment for the restart aid will be made on the basis of the information provided when submitting the application.

The direct application for restart assistance can only be submitted once. A subsequent change to the application after it has been sent is only possible in the final invoice. It is recommended that you take your time to ensure the details and information submitted are correct.

It is essential to understand this process is very closely linked with your tax profile and past declarations, as a means of verification and also legitimacy. As such, you can expect to accept and agree to a variety of data sharing agreements, and potential random audits of the information you submit. Worth noting also, is 2021 brings in some new tax changes you should be familiar with as well.

Basically, there is a lot of new information and consequences as a result of Corona on the finances and taxes of self-employed and freelance folks. And, not all of it is bad, actually. There is real relief for the legitimate suffering of small businesses, it is simply, and as ever in Germany, crucial that all due diligence is taken in the coming months and year of business. It is the hope that outlining the bare basics of the Restart Help has given you a stronger understanding of the assistance and if you are able to apply!