Coronavirus, Vorstandsvergütung, Insurance Premium Tax, German Administrative Guidance, Umlaufverfahren

Update: Immediate tax measures to take account for effects of Coronavirus

The Coronavirus pandemic (COVID-19/SARS-CoV-2) poses fundamental medical, but also economic challenges for the entire world. According to the German Federal Government’s package of measures dated 13 March 2020, tax measures should be made possible to avoid undue hardship in an unbureaucratic manner. This is being implemented by the Federal Ministry of Finance, along with the supreme tax authorities of the Federal States, in two circulars. In the meantime, an extension of the deadline for wage tax registrations has been made possible. There will also be tax exemptions for certain bonus payments.

Tax deferral for taxpayers affected by the Corona crisis

Taxpayers who can prove they are directly and significantly affected by the Corona crisis can apply for a tax deferral until 31 December 2020. The request, including a statement of their circumstances, should be directed to the local tax office. This applies to taxes that were already due or will become due before this date. Deferral interest will not be charged. Moreover, there are good reasons that the regularly necessary provision of collaterals might be waived on the part of the German tax authorities. However, the Federal Ministry of Finance has not explicitly regulated this in the respective circulars.

The deferral option is provided for taxes administered by the state tax authorities on behalf of the Federal Government (e.g. individual income tax, corporate income tax, VAT, trade tax). In contrast, withholding taxes (e.g. wage tax, dividend tax) are not covered by the circulars.

The deferral regulation constitutes a discretionary decision of the tax authorities. Nevertheless, the Federal Ministry of Finance explicitly states that requests are not to be rejected because taxpayers cannot prove the amount of the economic damage caused by the Corona crisis in detail. In particular, „no strict requirements are to be imposed“ when reviewing the prerequisite for deferral. However, requests for deferral of taxes due after 31 December 2020 must be specifically justified.

Adjustment of advance payments

Taxpayers economically affected by the Corona crisis can also apply for an adjustment of their advance payments for income and corporate income tax until 31 December 2020. According to the simultaneously published decree of the supreme tax authorities of the Federal States dated 19 March 2020, this applies also to trade tax. In this regard, the locally responsible tax office will adjust the trade tax basis according to the request for adjustment. The relevant request must be submitted to the local tax office. The municipality is bound by the assessments of the tax office. Just as with requests for deferral, a proven quantification of the economic damage incurred as a result of the crisis should not prevent the request from being granted.

Requests for the adjustment of advance payment of taxes due after 31 December 2020 must – as in the case of deferral – be specifically justified.

Suspension of enforcement measures during the Corona crisis

Finally, enforcement debtors can inform their competent tax office that they are directly and significantly affected by the Corona crisis. As a result, enforcement measures will be waived until 30 December 2020 for all taxes as defined above. Furthermore, late payment surcharges for these taxes will be waived from 19 March 2020 until 31 December 2020. Besides, the foregoing shall apply accordingly, if the tax office becomes aware of the direct, significant economic impact on the enforcement debtor in another way.

Extension of deadline for wage tax registration

In addition to the above tax deferral options, upon request Germany’s Federal Sates Bavaria and North Rhine-Westphalia grant extensions of up to 2 months for the submission of wage tax registrations for the first quarter. The Federal Ministry of Finance, in agreement with the supreme tax authorities of the Federal States, has now published a circular dated 23 April 2020, stating that the deadlines for submitting monthly or quarterly wage tax registrations can be extended by a maximum of 2 months in individual cases and upon request by the employer. This applies insofar as the employer proves that he is prevented from submitting the wage tax registrations on time due to the Corona crisis and not due to his own fault.

Tax-free bonus payments to employees

On the basis of a circular of the Federal Ministry of Finance dated 9 April 2020  bonus payments to employees up to an amount of EUR 1,500 are exempt from tax and social security obligations provided that these special payments are recorded in the payroll account in addition to the wages owed by the employer in any case. Furthermore, only those bonus payments are exempt that are paid in the period from 1 March 2020 to 31 December 2020. Please note our special blog post in this regard.

You can find the request form here.

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    Carsten Quilitzsch ist Steuerberater, Diplom-Kaufmann und Assoziierter Partner an den Standorten Bonn und Düsseldorf.

    T +49 228/95 94-226

    Christian Heider ist Steuerberater am Standort Bonn. Er berät im Bereich Internationales Steuerrecht und Verrechnungspreise sowie bei der Besteuerung von Unternehmen und Konzernen. Ferner berät er Familienunternehmen.

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