BERLIN: Germany will extend a tax deferral scheme designed to help firms hit by the impact of the COVID-19 pandemic by a further three months, Finance Minister Olaf Scholz said on Tuesday.

The central government and the 16 federal states agreed the extension of the programme which was launched last year during the height of the first wave of the pandemic, Scholz said.

"That's good news for companies," Scholz said, adding the measure would improve the liquidity of firms and protect jobs.

Applications for tax deferral can now be submitted until June 30 which means interest-free tax deferral will be granted until Sept. 30, Scholz said.

The step increases the need for a supplementary budget this year as the initially earmarked 180 billion euros of net new debt probably won't be enough to cover additional costs of cushioning Europe's largest economy from the impact of a third wave of coronavirus infections.

Scholz is expected to present the draft budget for 2022 next week and with it the likely supplementary budget for 2021.