Corona Tax Assistance Act passed by Bundesrat; governing coalition agrees on further tax measures in stimulus package
Corona Tax Assistance Act passed by Bundesrat; governing coalition agrees on further tax measures in stimulus package In addition to the first tax relief measures, which were initiated by the federal government and the federal states on a largely executive basis, further tax measures will be added with the law passed today by the Bundesrat on the implementation of tax relief measures to cope with the corona crisis (Corona Tax Assistance Act, Bundestag printed paper 19/19150
and Bundesrat printed paper 290/20
) and the economic stimulus package
“Fighting Corona consequences, securing prosperity, strengthening future capability” prepared this week by the governing coalition.
1. Corona Tax Assistance Act
The Corona Tax Assistance Act essentially contains the following tax measures:
- Application of the reduced VAT rate to restaurant and catering services provided after 30 June 2020 and before 1 July 2021, with the exception of the supply of beverages;
- Extension of the tax retroactive periods regarding corporate reorganisations from eight to twelve months for a temporary period (with possibility of extension by decree) – complementary to the amendment of Section 17 para. 2, sentence 4 of the German Transformation Act (Umwandlungsgesetz) as part of the Act to Mitigate the Consequences of the COVID-19 Pandemic under civil, insolvency and criminal procedural law (Federal Gazette I 2020, pages 569 subsequent);
- Income tax exemption for additional benefits granted by the employer to the employee in the period from 1 March 2020 to 31 December 2020 due to the COVID-19 pandemic, not exceeding € 1,500;
- Income tax exemption for employer contributions to short-time work compensation paid in the period from 1 March 2020 to 31 December 2020, provided that these contributions, together with the short-time work compensation, do not exceed 80 % of the difference between the target and actual remuneration according to Section 106 Volume III of the Social Insurance Code (Drittes Buch Sozialgesetzbuch – SGB III).
Moreover, the possibility was opened up that the German Federal Ministry of Finance could, by means of the decree, adopt different provisions regarding the deadlines for reporting cross-border situations (DAC 6). A postponement or extension of the deadline is currently under discussion.
2. Key tax measures in the stimulus package
The governing coalition has also announced particularly the following tax measures in its stimulus package presented this week:
- From 1 July 2020 until 31 December 2020, a temporary reduction in the regular VAT rate from 19 % to 16 % and the reduced VAT rate from 7 % to 5 %;
- Extension of the tax loss carryback possibilities for the years 2020 and 2021 to € 5 million (or € 10 million in the case of a joint assessment) already usable for the year 2019 by creating a tax ‘corona provision’ (to be released by 31 December 2022);
- Introduction of a declining balance depreciation with a factor of 2.5 compared to the currently applicable depreciation and a maximum of 25 % per annum for movable assets for the years 2020 and 2021;
- Introduction of a so-called “option model” allowing partnerships to opt for the German corporate income tax regime;
- Increase in the discount factor for commercial income to four times the German trade tax assessment amount for the purposes of Section 35 of the German Income Tax Act;
- Deferral of the payment of the German import turnover tax to the 26th of the following month;
- Increase in the allowance to € 200,000 in the context of the German trade tax additions (Section 8 of the German Trade Tax Act);
- Mobility related measures, e.g. basing the German motor vehicle tax for passenger cars on CO2 emissions from 1 January 2021, granting a 10-year German motor vehicle tax exemption for purely electric vehicles until 31 December 2025 and its extension until 31 December 2030; and granting an “innovation premium” for electric vehicles;
- One-time child bonus of € 300 for each child entitled to child benefit (can be offset against the tax allowance for children, but not credited to the basic allowance) and increase in the single parent tax allowance to € 4,000 for the years 2020 and 2021;
- Retroactive granting of the subsidised rate of the tax subsidy allowance on an assessment base of € 4 million per commercial entity for the period from 1 January 2020 to 31 December 2025;
- Targeted reduction of the German Renewable Energies Act levy to 6.5 ct/kwh in 2021 and 6.0 ct/kwh in 2022.
3. Other relevant tax measures since 6 April 2020
Further, the German Federal Ministry of Finance has in the meantime introduced a number of tax measures to promote aid to those affected by the COVID-19 pandemic (including simplifications regarding donations, etc., Notices of 9 April 2020 – IV C 4 – S 2223/19/10003 : 003, and 26 May 2020 – IV C 4 – S 0174/19/10002 :008) and specified the extension of the declaration period for certain wage tax registrations during the COVID-19 pandemic (Notice of 23 April 2020 – IV A 3 – S 0261/20/10001 : 005). Moreover, the German Federal Ministry of Finance has established the opportunity for commercial entities that are expected to make a loss this year because of the COVID-19 pandemic to apply to their competent tax office for refund of amounts paid for the year 2019 (based on a flatrate calculated loss for the year 2020), in addition to the advance payments already made for the year 2020 (Notice of 24 April 2020 – IV C 8 – S 2225/20/10003 : 010).
Finally, agreements on mutual cooperation and consultation between Germany and some of its neighbouring countries (Luxembourg, the Netherlands, Austria, Belgium and France) have already been concluded with regard to cross-border workers.
Any questions? Please contact: Carsten Heinz, Georg Edelmann orUlrike Sommer
Practice Group:Tax & Private Clients