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Those who applied for coronavirus aid to secure their livelihood or to bridge short-term liquidity gaps sometimes find themselves confronted with the criminal suspicion of subsidy fraud even five years after the outbreak of the pandemic.

Good intentions don't always lead to good results.

The intention of politicians to provide quick and unbureaucratic assistance in the form of various COVID-19 relief measures, such as emergency aid, bridging loans, and November and December aid, was well-intentioned. These measures were intended to mitigate the economic impact of pandemic containment measures, such as business closures, lockdowns, and restrictions on personal services, and to safeguard the economic viability of businesses.

Criminal Liability for Subsidy Fraud

The risk of criminal liability arises as soon as aid is applied for, because incorrect or incomplete information regarding facts relevant to subsidies can be provided even during the application process. While at the beginning of the pandemic it was sufficient to estimate revenue losses and submit applications for individual companies, the information in the final statement of accounts, which had to be prepared for all companies within a corporate group, is now scrutinized very closely. In addition to the repayment of the COVID-19 aid, applicants face the initiation of criminal proceedings for subsidy fraud if discrepancies are found. Intentional offenses are punishable by a fine or imprisonment of up to five years. In particularly serious cases, the penalty is imprisonment of six months to ten years.

Tax Offense Risk

At the beginning of the pandemic, it was often assumed that COVID-19 relief funds were not taxable as subsidies. However, anyone who failed to declare receipt of COVID-19 relief funds in their tax return may face charges of tax evasion. The exchange of data between the granting agency and the tax authorities allows for comparisons, including in tax matters, and carries a high risk of detection.

Risks for Consultants

Investigations are also targeting tax advisors who, following the design of the COVID-19 relief programs, submitted applications and final statements on behalf of their clients as so-called "auditing third parties." Consultants can be accused of aiding and abetting subsidy fraud, particularly if they could have recognized that applications were incorrectly submitted.

Diversity of Prosecution and Defense

The circumstances that could constitute criminal conduct are as diverse as the companies that applied for COVID-19 relief. Cases range from applications submitted for non-existent companies to simply careless calculation errors in the application process. The defense strategies in each individual case can be equally varied.

Diversity of Prosecution and Defense Strategies

The circumstances surrounding the alleged criminal conduct are as diverse as the companies that applied for COVID-19 relief. Cases range from applications submitted for non-existent businesses to simple, careless calculation errors in the application process. The defense strategies in each individual case can be equally varied.

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