One of the ways the German government is assisting citizens is by the implementation of tax relief measures. The government is leaving no stone unturned when it comes to cushioning the blow caused by COVID-19. The main focus is to reduce prepayments and waive penalties on late payments until December 31, 2020. This is a breakdown of how the government hopes to assist taxpayers as published by the German Federal Ministry of Finance on March 19.
The below-mentioned waivers apply to taxpayers whose income is directly affected by COVID-19.
Tax Relief Measures for Germans
Simplify tax deferral approvals
Tax consults can defer payments that were due up to December 31, 2020, if the collection could lead to possible hardships. Taxpayers who defer on payments during this period will not be subjected to provide evidence of income loss due to the coronavirus pandemic. This includes German income, trade, and corporate tax. Also, no interest payable on the deferred payments.
Simplify the reduction process of tax prepayments
The German Federal Ministry of Finance announced a reduction on the prepayment of taxes. They went on to say that this should be done swiftly when there’s evidence that a taxpayers income is lower in the current year, compared to the previous year.
Waive on penalties until December 31, 2020
Companies are eligible to a tax refund for all tax prepayments already made for 2020 including some taxes paid in 2019. Also, provisions are made for companies to offset the potential loss of income in 2020 against 2019 profits. The recalculation of 2019 advance payments will be reworked on a 15% loss carryback, and the difference refunded. However, the adverse will happen should the company make a profit in 2020. The company will have to repay the difference.
Tax exemption of bonus payments and benefits
Any persons receiving bonus payments and benefits of up to EUR 1,500 paid between March 1, 2020, and December 31, 2020, will be exempt from wage withholding taxes and social security contributions. Specifically, for extra efforts during the COVID-19 pandemic.
Exceptions for cross-border workers.
The German government is negotiating a bilateral agreement to allow all cross-border workers currently working from home during this pandemic, to be treated as if they travelled to their place of work during the pandemic.
For restaurant owners, all VAT on food items will be lowered to 7% starting July 2020 until June 2021. Additionally, all employers are entitled to a two-month extension for filing quarterly taxes and payroll tax declarations
Furthermore, The German Ministry of Finance also announced measures further to assist both citizens and businesses during this global pandemic. The decision for tax relief is a win for Germans as the economy heads for a recession. The extended measures published on April 30, include:
1) Sales tax to be reduced from 19% to 7% for all restaurants and catering services from June 30, 2020, and July 1, 2021. This, however, excludes sales on beverages.
2) Extension of transitional regulation until December 31, 2022
3) An exemption on social security contribution on employer subsidies for up to 80% including part-time and seasonal work.
To see some of the other ways the German government is assisting in the mitigation of Covid-19 damages, read: Government Finance Schemes in Germany.