On 3 June 2020, the coalition parties agreed in the coalition committee on a package of measures to help Germany quickly return to a sustainable growth path. A further aim of the measures is to ensure that Germany’s position after the crisis will be stronger than before and to ensure the country’s sustainable success.
Tax relief is one of the measures that will be presented in the following overview. The information is based on a results paper, which may not yet reflect all the details of the proposed changes. A concrete draft law remains to be awaited in this respect.
Economic stimulus and crisis management package
- Temporary reduction of the value-added rate from 19% to 16% and from 7% to 5% for the period from 1 July 2020 to 31 December 2020.
- Changes in VAT rates always raise a number of legal and practical issues. The first and most important aspect to be considered is the correct determination of the time of performance since this has direct consequences for the value-added tax to be paid and the deductible input tax. This will probably require additional tax keys to be set up in order to ensure correct accounting.
- Unlike the planned temporary reduction of the VAT rate on restaurant and catering services, which is to apply to sales in the period between 1 July 2020 and 30 June 2021, the general temporary reduction of VAT rates is only planned for a period of six months.
- If no further changes are made in the legislative process, the VAT rate on restaurant and catering services would then be 5% for six months and 7% for another six months.
- Given the existing system of the VAT Act, the changed tax rates are likely to apply also to value-added tax on imports.
- Postponement of the due date of import VAT to the 26th day of the following month.
- Import VAT is payable within the time limit set by the customs authorities (typically a maximum of ten days from the date of notification of the customs debt to the debtor).
- According to current law, payment of import VAT can be postponed without the provision of security if the tax to be paid can be deducted in full as input tax (section 21 (3) of the Value-added Tax Act (UStG, Umsatzsteuergesetz)).
- The (unlimited) provision that is now planned goes beyond the existing simplification options.
- Extension of the amount of the tax loss carryback for the years 2020 and 2021 to a maximum of EUR 5 million or EUR 10 million (in the case of joint assessment), respectively.
- A mechanism will be introduced by means of which the loss carryback can already be claimed in the 2019 tax return, for instance, by posting a tax reserve (which would have to be released in 2022 at the latest).
- No further changes in the use of losses (for instance, within the framework of minimum taxation) are planned.
- Introduction of declining depreciation for wear and tear for the fiscal years 2020 and 2021.
- The currently applicable depreciation rates will be increased by a factor of 2.5 (with an absolute limit of 25% depreciation p.a.).
- Scope: movable fixed assets.
- Probably only intended for items newly acquired in 2020 and 2021 because listed under the ‘Investment incentive’ heading.
- Option model for corporate income tax for partnerships (as an unlimited measure).
- Increase in the reduction factor for income from commercial operations to four times the trade tax base (as an unlimited measure).
- Increase in the tax-exempt amount for existing add-back criteria to EUR 200,000 (previously: EUR 100,000) for trade tax.
- Payment of a one-off child bonus of EUR 300 per child for each child eligible for child benefit.
- The bonus will be offset against the tax-exempt child allowance – comparable to the system for child benefits – and will not be credited against basic social security benefits.
- Increase in the amount of relief for single parents from currently EUR 1,908 to EUR 4,000 for the years 2020 and 2021
- The relief amount for single parents (section 24b of the Income Tax Act (EStG, Einkommensteuergesetz)) can be deducted from total income.
- Under current law, the entitlement amounts to EUR 1,908 p.a. if the taxpayer’s household includes at least one child eligible for child allowance or child benefits.
- For each additional child, the entitlement is increased by EUR 240 p.a. in accordance with current law. It is not yet clear how this will be taken into account in the context of the temporary increase.
- Increase in the assessment basis for tax relief for research to up to EUR 4 million p.a. per company.
- Validity: Retroactively as of 1 January 2020 and limited until 31 December 2025.
- Tax relief for research is regulated in the Research Allowance Act (FZulG, Forschungszulagengesetz) and has been in effect since 1 January 2020.
- Beneficiaries are research and development projects (R&D projects) if they fall into one or more of the categories of fundamental research, industrial research or experimental development.
- Under current law, the maximum assessment basis totals EUR 2 million p.a.
- Stronger orientation of motor vehicle tax for passenger cars to CO2 emissions
- For new cars registered in or after 2021, the assessment basis will mainly refer to CO2 emissions per kilometre and will be gradually raised in stages above a threshold value of 95g of CO2 per kilometre.
- Furthermore, the existing ten-year vehicle tax exemption for purely electric vehicles will be granted until 31 December 2025 and extended until 31 December 2030.
- Increase in the purchase price limit from EUR 40,000 to EUR 60,000 for the taxation of private use of purely electric company cars.
- Under current law, private use is taxed at 0.25% instead of 1% of the gross list price for each calendar month if the motor vehicle is purchased after 31 December 2018 and before 1 January 2031, if the vehicle does not emit any carbon dioxide per kilometre driven and if the gross list price does not exceed EUR 40,000.
- The increase in the purchase price limit is therefore likely to relate to purchases in the years 2019 up to and including 2030.
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