Deferral of tax
- No strict requirements for checking the conditions for deferral for (follow-up) deferrals by December 31, 2020 for payable taxes.
- Deferrals can be granted free of interest and under the relieved procedure until 31 March 2021.
- Further requirements:
- For "taxpayers demonstrably affected directly and considerably";
- Presentation of circumstances necessary in the request for reduction; however the amounts of individual losses need not be demonstrated;
- Plausible information that the coronavirus crisis has serious negative effects on the economic situation of the taxpayer is sufficient;
- For requests/applications beyond the period until 31 December 2020: specific justification necessary;
- Request for deferral possible for income tax, corporation tax, church tax, solidarity surcharge and value added tax;
- Requests for deferral of tax falling due are only possible after it has been assessed;
- The period of deferral is at the discretion of the competent tax office in each individual case (taking into account the individual requirements and specific situation); without request for a particular period of deferral, deferrals are initially granted for a period of three months; follow-up deferrals are possible until 31 December 2020 in principle.
- Collateral security is usually not necessary.
Adjustment of advance payments
- Adjustment of advance payments of income tax and corporate tax (incl. solidarity surcharge and church tax, if applicable) and trade tax upon request until 31 December 2020.
- For "taxpayers demonstrably affected directly and considerably"
- Presentation of circumstances necessary in the request for reduction; however the amounts of individual losses need not be demonstrated
- Plausible information that the coronavirus crisis has serious negative effects on the economic situation of the taxpayer is sufficient
- For requests/applications beyond the period until 31 December 2020: specific justification necessary
- If advance payments have already been made for assessment period 2020 the reduction may have the effect that advance payments already paid are refunded
- In addition, tax offices are to refrain from assessing retroactive advance tax payments until 31 December 2020 for taxpayers considerably and directly negatively affected by the coronavirus crisis.
Suspension of enforcement measures
- Enforcement measures (such as seizure of accounts) are to be dispensed with until 31 December 2020
- In this regard, the penalties for late payment carried into effect in the period between publication of the BMF guidance on 19 March 2020 and 31 December 2020 can be waived
- Entity liable for tax must be directly and considerably affected
- Suspension of enforcement measures, once this becomes known to the tax office through notification by the taxpayer/taxable entity or in another way
- Applies to income tax, corporation tax, solidarity surcharge, church tax, payroll tax and value added tax
Extended loss carryback
- increase for 2020 and 2021 to EUR 5m or EUR 10m (joint assessment), possibility to utilize 2020 losses already for 2019:
- Adjustment of prepayments for 2019: Application for reduction of prepayments by a flat-rate 30% reduction in the total amount of income; max. EUR 5,000,000 or EUR 10,000,000 (joint assessment); 2020 prepayments must have been reduced to EUR 0
- Preliminary loss carryback for 2020: upon application, within tax assessment for 2019 deduction of 30% of the total amount of income as provisional loss carryback for 2020; 2020 prepayments must have been reduced to EUR 0; provisional loss carryback must be examined within tax assessment for 2020 and tax assessment 2019 changed if necessary
- replaces the flat-rate loss carryback of 15% according to BMF guidance of 24 April 2020 ("Application for a flat-rate reduction of 2019 prepayments 2019").
Special regulations for cross-border commuters
- The BMF would like to come to a temporary consultation agreement with neighbouring states: it is to be prevented that as a result of increased working from home, salaries and wages become taxable in the country of residence of the cross-border commuter
- Cross-border commuters are to be treated during this period as though they have pursued their work as usual at their actual place of work
- Agreements already made: Luxembourg, the Netherlands, Austria, Belgium, France, Switzerland (external links).
Tax exemption of special payments („Corona-bonus“) up to EUR 1,500
- In the period from 1 March until 31 December 2020, employers can provide employees with grants and assistance up to an amount of EUR 1,500 on a tax-exempt basis in the form of allowances or benefits in kind to cope with the effects of the coronavirus crisis.
- These must be provided in addition to the salary or wages already owed.
Tax exemption for employer grants to increase short-time allowance and seasonal short-time allowance
- In accordance with the social security law, grants from the employer for short-time and seasonal short-time allowance are exempt from tax up to 80 percent of the difference between the target-wage and the actual wage.
- Prerequisite for this is that such grants are provided for the period 1 March 2020 until 31 December 2020.
- The tax-exempt grants to increase short-time allowances are to be recorded in the wage account and have been included as a further exclusion for the annual adjustment of income tax (Lohnsteuer-Jahresausgleich) by companies.
Deadline extension for wage tax registration
- BMF guidance of 23 April 2020: Extension of the declaration period for quarterly and monthly wage tax returns during the Corona crisis (external link)
- Upon request, employers can extend the deadlines for submitting wage tax returns during the Corona crisis in individual cases
- It is necessary that they themselves or the person responsible for payroll accounting and wage tax returns are demonstrably prevented through no fault of their own from submitting the wage tax returns on time.
Other tax measures for businesses
- Re-introduction of declining-balance method of depreciation: for moveable assets acquired or produced in 2020 and 2021; max. 25% per year, max. with the factor 2.5 of the straight-line depreciation method; first for 2020
- Tax reduction for income from trade or business for individuals: increase in the reduction factor from 3.8 to 4 times the trade tax base rate
- Extension of the periods for tax privileged reinvestments (Sec. 6b Income Tax Act; to the extent a reinvestment reserve is still remaining and would have to be dissolved at the end of a fiscal year ending after 29 February 2020 and before 1 January 2021) and investment allowances (Sec. 7g Income Tax Act) by one year
- Trade tax add-backs: increase of the allowance of financing expenses pursuant to § 8 no. 1 Trade Tax Act from EUR 100,000 to EUR 200,000 from 2020
- Tax incentive for research: Duplication of the maximum assessment base to EUR 4,000,000 per enterprise and year; maximum subsidy EUR 1,000,000 (previously: € 500,000); for eligible expenses incurred after 30 June 2020 and before 1 July 2026
- Company car taxation: Increase in maximum purchase price of electric company cars for preferential taxation (only 25% of the assessment basis) from EUR 40,000 to EUR 60,000; first application from 1 January 2020
- Child bonus: one-off EUR 300 bonus for each child who is entitled to child benefit for at least one calendar month in 2020; the bonus shall be set-off against the child allowance in the tax return
- Extension of the possibility to carry out reorganization with retroactive effect: temporary extension of the possibility to carry out reorganization with retroactive effect to 12 months for tax purposes; this extension leads to a synchronization with the extension of the civil law retroactive period.
Temporary VAT rate reduction (July – December 2020)
- The standard VAT rate is reduced from 19% to 16% and the VAT “reduced rate” is reduced from 7% to 5% for the period 1 July 2020 to 31 December 2020.
- On 30 June 2020, the Ministry of Finance (BMF) issued guidance to implement the reduced VAT rates.
VAT reduction for gastronomy
- The VAT rate for restaurant services (i.e. in-house dining) provided after 30 June 2020 and before 1 July 2021 (with the exception of drinks) is reduced from 19% to 7%. Therefore, and in combination with the above mentioned temporary VAT rate reduction as of July 1 (from 19% to 16% and from 7% to 5%) the following VAT rates apply for restaurant and catering services (with the exception of drinks):
- after 30 June 2020 and before 1 January 2021: 5%, and
- after 31 December 2020 and before 1 July 2021: 7%.
Deferral of due date for import VAT
- until the 26th of the second month following that of import.
Investment tax measures
- BMF guidance of 9 April 2020: Investment tax measures to take account of the economic effects of COVID-19 (external link)
- For investment funds (mutual funds), passive violation of limits between 1 March 2020 and 30 April 2020 does not constitute a material breach (major violation) within the meaning of marginal ref. 2.18 of the BMF guidance of 21 May 2019, and is not taken into account in the 20-business day limit as defined by marginal ref. 2.19 of this BMF guidance
- For special investment funds, passive violation of limits between 1 March 2020 and 30 April 2020 is not considered a material breach of the investment provisions of Section 26 of the German Investment Tax Act [InvStG]
Encouraging and supporting social commitment during the coronavirus crisis
- BMF guidance of 9 April 2020: Tax measures to encourage assistance for those affected by the coronavirus crisis (external link)
- Applies to support measures implemented between 1 March 2020 and 31 December 2020 (at the latest)
- Inter alia:
- Simplified process for providing evidence of donations
- Fundraising campaigns by non-profit organisations to encourage the assistance of those affected by the coronavirus crisis: use for purposes not specified in the bylaws
- Measures by non-profit organisations to encourage the assistance of those affected by the coronavirus crisis: use of other existing funds that are not subject to any other specific use
- Tax treatment of donations from operating assets: treatment of donation as a sponsoring measure; donations to a business partner; other donations; treatment of donations at the recipient
- Salary/wage donation: not considered taxable salary/wages
- VAT treatment of materials and equipment, rooms and facilities as well as free of charge provision of medical supplies and free of charge provision of personnel for medical purposes
- Requirement for prompt use of funds, release of reserves and membership fees of tax-privileged corporations.
Relief for companies during the coronavirus crisis through simplified deferral options
- Primarily using the assistance and support measures provided by the German federal government for protection (e.g. grants and loans)
- Deferral (of contributions for March and April 2020) possible at the request of employers until the end of May 2020
- Detailed reasons for application are replaced by a statement that the employer has suffered a considerable financial loss (loss of revenue) as a result of the pandemic
- No charge of interest for deferral (also applies to contributions that have fallen due prior to March 2020)
- No imposition of penalties for late payment and dunning fees
- Temporary protection against enforcement measures until May 2020 for all overdue contributions may be possible
- (last) extension of the deferral of social security contributions for May 2020 with modified requirements for the relief.
Tax measures as part of the Recovery Plan
Reduced VAT rates (€20 billion)
- The VAT standard rate is to be decreased to 16% (from 19%) and the VAT “reduced rate” to 5% (from 7%) until 31.12.2020.