The Federal Ministry of Transport and Digital Infrastructure (BMVI) is providing EUR 50 million annually until 2023 to promote computer games in order to strengthen Germany as a location for developers. In the first phase, de minimis funding will be provided with grants of up to EUR 200,000. In a second phase larger-scale funding will also be possible.
First-time support for the games industry
The funding, which the German games industry has long been waiting for, serves the purpose of promoting this part of the digital creative industry and thus its innovative power. The BMVI expects spill-over effects into other economic sectors (e.g. architecture and construction, mobility, education, health and care). This type of support for the games industry is being offered for the first time in Germany, so that many of the companies concerned are not yet familiar with the funding modalities or the correct application procedure.
What is being funded?
The object of the funding is the development or production of an interactive digital game or the development of a prototype of an interactive digital game. Eligible for funding are personnel costs, project-related costs of the development studio, marketing in relation to the product by the producer including tests prior to market launch (max. 15 percent of total costs), costs for naming rights and licenses as well as costs for the publisher pitch. Not eligible are costs incurred by the publisher, start-up costs, costs in connection with relocation and costs incurred before or during the application process. Funding is provided in the form of a non-repayable grant.
Who will be funded?
Applications may be submitted by companies with their registered office, permanent establishment or branch in Germany. This requirement applies for the entire duration of the grant, i.e. from the first to the last payment of the grant amount. The companies must be listed in the commercial register – companies under civil law (GbR) cannot submit applications. Foreign cooperation partners must finance their expenses themselves. Likewise, companies in difficulty or companies which have not complied with the recovery of aid are not eligible for funding.
No prerequisite for funding is the status of an SME (small or medium-sized enterprise). Large companies can also be eligible for funding. However, SMEs can receive a higher percentage of funding:
- Funding quota for small enterprises: 70 percent,
- Funding quota for medium enterprises: 60 percent,
- Funding quota for large enterprises: 50 percent,
How to obtain a grant?
An application for funding must be submitted within the set deadline via the federal electronic application system ("easy-Online"). The project must first be outlined; a concrete description of the project must be submitted during the further application process. The application must contain a financing plan that includes a detailed cost calculation and proof of overall financing. If funding is granted, a copy of the product must be made available to the BMVI for archiving purposes.
Maximum amount of aid applies per group of companies
The maximum amount of de minimis aid is EUR 200,000 per group of companies. This is particularly relevant in the games industry due to the small-scale structure of companies, which are often linked to each other under company law. A group of companies is thus regarded as a single enterprise from the point of view of state aid law, irrespective of its corporate law structure and the number of its subsidiaries or sister companies. The decisive factor is that all units are legally or factually controlled by one and the same unit (affiliated companies).
SME status depends on participations
Participations in other companies are also relevant for the SME status and thus the funding quota:
- No addition of employees, turnover or annual balance sheet totals if a venture capital company, a university, an institutional investor or a small autonomous local authority holds up to 50 percent of the shares.
- A pro-rata addition of the data (number of employees and turnover or annual balance sheet total) is carried out for partner enterprises, i.e. enterprises which hold 25 percent to 50 percent in another enterprise or in which shares of 25 percent to 50 percent are held by other enterprises.
- A complete addition of the data is carried out for affiliated undertakings.
The data relevant for the SME status are derived from the latest approved annual report. If such an annual report is not yet available, the company can estimate the figures on the basis of a business plan. An enterprise loses or gains SME status if, on the closing date for the accounts, the figures are exceeded or fallen short of in two consecutive financial years. If the SME status is lost during an aid period, this is only relevant if a higher funding quota than admissable for the size of the company has been granted. The status is without prejudice to the grant of 50 percent of eligible costs.
Changes in company law may make funding redundant
Changes among the shareholders or a change of control at the subsidised company can render a subsidy redundant, as can a transfer of the registered office or the merger of the subsidised company with another company.
The effort required for a grant application is manageable, especially if it is included in the project planning right from the start. In return, grants of up to 70 percent are available, which are non-repayable if the project is completed properly. Due to the structure of the companies in the games industry, questions could arise above all about the attribution of company participations, which can have a great influence on the eligibility and amount of funding.
Originally published Heuking, May 2020
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.