Since March of this year, many companies – small, medium-sized but also large – have been struggling with the effects of the Corona pandemic. Breaking supply chains, the suspension or significant shutdown of production in many sectors of the economy, and the absence of employees due to illness or childcare are leading to noticeable economic and financial burdens for companies.
The federal and state governments, but also the social security funds, support the affected companies through a variety of measures.
In the following, we would like to provide an up-to-date overview of important tax measures.
Deferral and refund of taxes
As early as March (BMF letter of 19.03.2020), the Federal Ministry of Finance (BMF) opened up the possibility of deferring taxes due to the Corona pandemic. These deferrals mainly concern corporation, trade, income and sales tax. In addition to the deferral of future tax payments, the retroactive refund of advance payments already made for 2020 is also possible. Individual federal states also allow the reduction of the special advance payments for VAT already paid. The deferrals are interest-free. Also, the usual high hurdles that have to be overcome when applying for a deferral are practically non-existent. The applicant only has to demonstrate that he is directly and not insignificantly affected. A deferral of wage tax and capital gains taxes is currently not possible. In addition to the facilitated deferral, which is valid until 31.12.2020, the tax office also grants a stay of enforcement.
Tax exemption of aid to employees
The Federal Ministry of Finance (BMF letter of 09.04.2020) has granted a tax-free allowance of €1,500 for aid and support provided by the employer to employees in the form of grants or benefits in kind. This applies until 31.12.2020 for support granted in addition to wages.
Extension of the deadline for filing income tax returns
In a letter dated 23.04.2020, the Federal Ministry of Finance granted the extension of the return deadlines for wage tax returns upon application. These are to take effect if the company itself or the payroll accounting officer is demonstrably prevented from submitting these declarations on time due to the Corona crisis through no fault of their own. The deadline extension is a maximum of two months.
Flat-rate reduction of tax advance payments already made in 2019
Due to the Corona crisis, the profits of quite a few companies in 2020 will decrease significantly. It cannot be ruled out that companies will suffer corona-related losses. In a letter dated 24.04.2020, the Federal Ministry of Finance therefore grants companies and private individuals the option of having the tax prepayments already made in 2019 reassessed due to expected losses in 2020 in a simplified procedure and thus obtaining tax refunds. The lump-sum loss carryback granted upon application is limited to 15% of the profits on which the advance payments for 2019 were based. From an amount of €1,000 thousand (or €2,000 thousand in the case of jointly assessed spouses), this flat-rate loss carryback is no longer possible.
In discussion: Reduced tax rate in the catering industry
The hotel and restaurant industry has been particularly hard hit by the Corona pandemic. In many hotels and restaurants, sales have collapsed completely in some cases with the beginning of the lockdown. Therefore, the federal government is considering a temporary (from 01.07.2020 to 30.06.2021) reduction of the VAT rate for food in restaurants from 19% to 7%.
Deferral of social security contributions by health insurance companies and employers’ liability insurance associations
The tax measures of the federal and state governments are flanked by support measures from the social security funds. For the months of March and April, the health insurance companies have deferred the contributions interest-free upon application. The deferred amounts are to be stated in May 2020 together with the contributions for May. Due to the foreseeable liquidity burdens, it remains to be seen whether the deferrals will continue to be granted beyond May 2020. Many employers’ liability insurance associations also allow the deferral of future contribution payments.
Facilitation of donation deductions
For donations from companies or private individuals in connection with the management of the Corona crisis, which are received in special accounts of legal entities under public law, domestic public services or officially recognised domestic associations of independent welfare services, including its member organisations, a simplified proof of donation applies without any limitation in terms of amount. As proof at the request of the tax office, the cash deposit slip or the booking confirmation from a credit institution (e.g. the bank statement, direct debit receipt or the PC printout for online banking) is sufficient.
Recommendations for action on tax measures as a result of Corona
All companies should check whether the relief provided by the federal and state governments in the areas of tax and social security contributions makes sense in order to protect liquidity and bridge temporary economic difficulties. However, these are deferrals and not a waiver of taxes and social contributions. In this respect, the liquidity burden remains latent. Companies are therefore advised to take additional measures to overcome the economic difficulties. External business consulting services are currently financially supported by the federal government with subsidies of up to 100%.
Please feel free to contact us if necessary!
What consequences do you expect from the Corona pandemic for your company? What other aid measures would be appropriate in your opinion? We look forward to your comments.
Image source: Pixabay, Photographer: h kama
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