Germany

Welcome to the high-level summary of Covid-19 related actions by the German Federal Government. The details and links below have been split between “Tax Filings Affected”, “Government Employee Wages Benefits Programs” and “Government Loan Programs”; and are extracts from the more detailed information available on the websites of the German Praxity Participant firms’ websites, links to which are available at the bottom of this page. Praxity Participant Firms in Germany are FALK GmbH & Co. KG, FIDES Treuhand GmbH & Co. KG, Flick Gocke Schaumburg GmbH, H/W/S GmbH & Co. KG, and Mazars

Tax Filing Affected

Tax Deferrals

  • Taxpayers who are demonstrably directly and not insignificantly affected by the Corona crisis can submit applications for a tax deferral according to Section 222 sentence 2 AO at the local tax office. This applies to taxes that were already due or still due by that time. In general, deferral interest should not be charged.

Adjustments of Advanced Payments

  • Taxpayers who are economically affected by the Corona crisis can also request an adjustment to their advance payments for income tax and corporate income tax until December 31, 2020. On the basis of the simultaneously published, identical state decree of March 19, 2020, this applies equally to trade tax.

Suspension of Enforcement during the Corona Epidemic

  • Enforcement debtors can inform their competent tax office that they are directly and economically affected by the Corona crisis. As a result, enforcement measures for all arrears or taxes due up to this point will be waived until December 30th, 2020
  • Default surcharges for these taxes will be imposed from March 19, 2020 to December 31, 2020

Extension of deadline for registration of income tax

  • In addition to the tax deferral options above, Bavaria and North Rhine-Westphalia grant deadlines for submitting income tax declarations for the first quarter by up to 2 months. In agreement with the highest financial authorities of the federal states, the BMF has now followed suit and stipulated in a letter dated April 23, 2020 that the deadlines for submitting monthly or quarterly wage tax registrations can be extended by a maximum of 2 months in individual cases and at the request of the employer. This applies insofar as the employer can prove that the Corona crisis prevented him from making the tax returns on time due to no fault of his own.

Temporary reduction in sales tax rates / postponement of the due date of import sales tax

  • For the period from July 1 to December 31, 2020, the standard tax rate is to be reduced from the current 19 to 16 percent and the current reduced tax rate from 7 to 5 percent.

Government Employee Wages Benefits Programs

The Employment Agency provides allowances for short-term work shortages

  • The amount of short-time work benefit is 67% (employees with at least 1 child entitled to child benefit) or 60% (other employees) of the net wage difference in the entitlement period, i.e. the difference between the net wage from the target wage (gross wage without short-time work) and the net wage from the Actual salary (actual gross salary with short-time work).
  • The max benefit period is 12 months. And application must be submitted to the Employment Agency within three months for which the allowance is applied.
  • The employer must qualify. The criterion includes: - Short-time work must have been effectively introduced under labor law - 1/3 of the employees of a company must be affected by a loss of earnings of at least 10% (since 15.3.2020 the Federal Government has been allowed to lower the threshold from 1/3 to 10% of the employees - the Federal Minister of Labor has already issued the relevant decree retrospectively on 1.3 .2020 announced, but it is still pending (as of March 19, 2020))
  • Loss of work must be temporary (that is, the probability of returning to full-time in the foreseeable future) and unavoidable (especially if it is not typical for the industry or the season, or can only be attributed to operational reasons).
  • Employees who have already been given notice of termination or who have signed a termination agreement are not entitled to short-time benefits
  • Employers must take the necessary measures to avoid short-time work, for example granting open vacation entitlements and reducing working time accounts

Social protection package II: increase in short-time work benefits On May 15, 2020, the legislature increased the short-time allowance with the Law on Social Measures to Combat the Corona Pandemic (Social Protection Package II). The short-time work allowance for those who receive short-time work allowance for their working hours reduced by at least 50 percent increases to 70 percent from the fourth month (previously this was 60 percent). Workers with children continue to receive an additional 7 percent. From the seventh month, the short-time allowance increases to 80 percent (or 87 percent for households with children). March is the first reference month for the calculation of the reference months. Thus, the increase to 70 percent (or 77 percent) will take effect from June at the earliest. This applies regardless of whether or not the employee's working time was reduced before March. The increase to 80/87 percent will take effect in September at the earliest. The higher rates apply until December 31, 2020. Social protection package II: changes in additional earnings In addition, from May 1, 2020, employees in all occupations can earn up to the full amount of their previous monthly income through a part-time job, without affecting the amount of short-time work benefits. The restriction to systemically relevant professions is lifted. The regulations are initially limited until the end of the year. Draft of the Corona Tax Assistance Act: (partial) tax exemption for the employer's allowance for short-time work benefits The draft law provides for voluntary employer subsidies for short-time working benefits to be exempt from tax up to 80 percent of the lost wages - in accordance with the treatment under social security law. The unpaid wage is calculated as the difference between the target wage and the actual wage. The tax exemption should be introduced retrospectively from March 2020 and apply until December 31, 2020. The draft law also stipulates that the employer must correct the wage tax deduction on corresponding grants made until March 2020 as a matter of principle.

Tax-free special payment to employees

  • The BMF letter of 9 April 2020 exempted special payments to employees up to an amount of EUR 1,500 from tax and social security obligations. This presupposes that the special payments recorded in the wages account are made in addition to the wages owed anyway. The special regulation also only includes those bonus payments that are paid in the period from 1.3.2020 to 31.12.2020.
  • You can find the application form here .

Government Loan and Support Programs

Economic Stabilization Fund Act (WStFG)

  • The fund has been allocated €600 billion to help alleviate economic effects of Covid-19 on larger companies. The fund can provide guarantees, recapitalization measures, or KfW loans. - Guarantees: The fund should be able to provide guarantees for corporate liabilities - especially debt financing - of up to EUR 400 billion. The guaranteed liabilities must have been established after the law came into force. The term of the guarantees and the liabilities to be hedged may not exceed 60 months. A fair consideration (guarantee interest) is to be charged for the takeover. - Recapitalization measures: In addition, the WSF can participate in the recapitalization of companies up to a total volume of up to 100 billion euros on market-oriented terms. Market conditions mean that a fair market value has been determined. This includes the acquisition of subordinated debt, hybrid bonds, profit participation rights, silent participations, convertible bonds and company shares. According to the draft law, participations of this type are only considered if there is an important federal interest in stabilizing the company and the purpose pursued by the federal government cannot be achieved better and more economically in any other way (subsidiarity). - KfW loans: Finally, the WSF cangrantthe Kreditanstalt für Wiederaufbau (KfW) loans to refinance the special programs that were assigned to it in response to the corona pandemic. This includes, in particular, aid loans to smaller companies and the self-employed.
  • Companies in qualified industries (not financial sector [FMStG] or bridge institutions [FMStBG]) and of a certain size are eligible. In the last two financial years before January 1, 2020, you must have total assets of more than 43 million euros, sales of more than 50 million euros and an average of more than 249 employees. It is sufficient if two of these three criteria are met. But smaller companies can aid be granted on the basis of the so-called individual decision by Economic Stabilization Fund Committee.
  • The company must not have already met the EU definition of “companies in difficulty” as of December 31, 2019.
  • Applicant companies must guarantee a " sound and prudent business policy ". This means that they must meet the legal standards with regard to their organization and staffing. The Corporate Governance Code can also be used as a guide.
  • The company must have no other financing options available.
  • Small and medium-sized enterprises (SMEs), including freelancers affected by the Corona crisis, are able to submit a simplified application for business advice to the Federal Office of Economics and Export Control (BAFA). Up to December 31, 2020, up to EUR 4,000 will be funded by BAFA without your own contribution. Application Link See KfW site for information regarding loans of companies more than 10 employees in response to the Corona Virus. Additional links to state ministry’s can be found for additional grant and emergency aid information. See BMWi information for small businesses and solo self-employed individuals.

Corona Tax Assistance Act The Bundestag dealt with the draft law on May 15, 2020 at first reading, but then referred it to the Finance Committee according to customary practice. It remains to be seen how quickly the legislative process will be completed. The law essentially provides for four tax changes:

  • Lowering the sales tax rate from 19% to 7% for the delivery of food in the catering trade
  • Extension of the transition regulation to § 2b UStG until December 31, 2022
  • Tax exemption from employer grants for short-time work benefits (up to 80% of the difference between target and actual remuneration)
  • Extension of the tax retroactive periods for various restructuring measures Certain state banks will also offer guarantees for medium-sized investment companies.

Corona Aid Grants Small and medium-sized companies whose turnover in April and May 2020 was reduced by at least 60 % as compared to April and May 2019 due to corona effects and whose turnover is expected to continue to fall by at least 50 % in the months June to August 2020 are eligible to apply. Declining revenues and fixed operating costs must be audited and confirmed by tax advisors or auditors. Within the scope of grants, up to 50 % of fixed operating costs are reimbursed in the event of a decline in sales of at least 50 % compared to the same month of the previous year. Up to 80 % of the fixed operating costs can be reimbursed in the event of a decline in sales of more than 70 %. The maximum reimbursement amount is EUR 150,000.00 for three months.

Links to Our Member Firms

Further Covid-19 advice

Flick Gocke Schaumburg GmbH

H/W/S GmbH & Co. KG

For any other news come to Praxity

See Praxity COVID-19 Webinar update from member firm experts

To find more information on other countries

The information contained herein on Covid-19 government measures within the G8, consists solely of information that can be found on the websites of one or more Praxity Participant firms, and has not been written, modified or verified by Praxity, it’s staff, officers or directors.