Coronavirus outspread across the Globe has shaken the lives as well as the economies of all countries. The Federal Government announced to support us with a large-scale 130 billion Euro stimulus package as a corona recovery plan and various measures such as emergency aid, short-time working compensation, flexible interpretations of additional earnings regulations, or the use of parking spaces to expand the gastronomic potential.
- 10 benefits from government as corona recovery plan:
- VAT reduction – corona recovery plan:
- 300 € Euro additional child benefit – corona recovery plan:
- Bonus payment of up to 1,500 Euro tax-free – corona recovery plan:
- Corona emergency aid for students upto 500 euros per month:
- Mandatory tax return for short time workers – corona recovery plan:
- Increase of short time work compensation -corona recovery plan:
- Tax benefits for cross border commuters:
- Environmental bonus for the purchase of climate- and environment-friendly electric vehicles:
- Quarantine due to Corona and continued payment of salary – corona recovery plan:
- Check your tax class and optimize the level of short-time working compensation:
10 benefits from government as corona recovery plan:
VAT reduction – corona recovery plan:
From 01.07.2020 the Federal Government will reduce the VAT rate from 19% to 16% (or from 7% to 5%) until the end of the year. A lot of items will be cheaper in supermarkets, brick and mortar stores, online. Already, you must be receiving emails from your internet, electricity providers. This can be the best time if you are looking to purchase the products.
300 € Euro additional child benefit – corona recovery plan:
As a major aspect of the Federal Government’s Corona Recovery Plan, all parents entitled to child benefits will receive a one-off child bonus of 300 Euro in 2020, paid out in two installments of 200 Euro in September and 100 Euro in October.
Bonus payment of up to 1,500 Euro tax-free – corona recovery plan:
The Federal Government wants to support companies and employees in this difficult Corona pandemic and has ensured that such payments up to 1,500 euros are tax-free this year. Employers can now pay subsidies up to an amount of up to 1,500 euros tax-free to their employees. Ask your employer is willing to support you with a tax-free extra payment during this Corona pandemic and short-time work. More details in German
Corona emergency aid for students upto 500 euros per month:
Most of the students make living by working as part time workers in restaurants, super markets, etc. And these students jobs are temporarily closed during the lockdown.
The Federal Government wants to support the affected students by monthly bridging aid of up to 500 euros. Students benefiting from loans, scholarships, or similar in the relevant month are not excluded from applying for interim financial aid. Depending on the proven need, between 100 euros and 500 euros can be paid out as a non-repayable grant.
Applications can only be filed separately for the months of June, July, and August 2020. A new application in – and for – a new month will only be admissible if the student is still eligible to apply. Students can submit an application on the Student Help Association (Studentenwerk)
Mandatory tax return for short time workers – corona recovery plan:
The tax is free for short time workers in general. Still, in the following year after receiving it, the law requires you to file a tax return. Every employee, who received more than a total of 410 Euro in wage replacement benefits (e.g. short-time working compensation or social security and parental allowance) has to file a tax return for the year 2020 in 2021.
Despite being tax-free, wage replacement benefits are added to your taxable income, which is the amount used to determine your individual tax rate. Therefore, receiving short-term working compensation can lead to an increase in the calculated tax burden, which results in a subsequent payment to the tax office. Therefore, employees who received wage replacement benefits in 2020 should save some additional money on their bank accounts to be prepared for the potential additional payment.
Increase of short time work compensation -corona recovery plan:
Due to the Coronavirus, the government has decided to set an additional incentive for companies and employees alike, making the additional pay by the employer tax- and deductible free from March 1st to December 31st, 2020 as part of corona recovery plan. The only condition is that short-term working compensation plus add on pay combined make up a maximum of 80% of the missed-out compensation package (the difference between gross wage and the reduced gross wage due to short-time work). Everything above that 80% threshold is taxed at a normal rate.
Tax benefits for cross border commuters:
Due to Corona pandemic a large number of border commuters cannot commute to work as usual and work from home.
The Federal Ministry of Finance announced working days at home due to the Corona pandemic can be billed as normal working days in the neighboring countries i.e. Luxembourg, Netherlands, Belgium, Austria, and France. More details in German.
Environmental bonus for the purchase of climate- and environment-friendly electric vehicles:
As part of the corona recovery plan, The purchase of sustainable electric vehicles is now more strongly supported by the government. The existing environmental bonus for the purchase of an electric car has doubled from 3,000 Euro to 6,000 Euro. This applies to all e-vehicles with a netlist price of up to 40,000 Euro. For the time being, the subsidies will be eligible until 31.12.2021.
Quarantine due to Corona and continued payment of salary – corona recovery plan:
If, as an employee, you are subject to a professional employment ban under the Infection Protection Act or are not allowed to work due to official quarantine, you are exempt from the obligation to work.
You will receive compensation equal to your net salary for the first six weeks paid by your employer. The latter can recover the money by application from the local health authority. With a longer quarantine, you will continue to receive the compensation but it is paid by the local health authority depending on the amount of your entitlement to sickness benefit.
Check your tax class and optimize the level of short-time working compensation:
The amount of short-time working compensation can be dependent on your tax class. Therefore, married couples and parents should do some research on whether a change in tax class might make sense for them.
In Germany, married people have the choice of whether to file their tax returns individually or ask for a joint calculation of the tax burden. When doing a joint declaration, there is also the opportunity to pick a tax class (III, IV with factor, V) for each partner. The person earning more money usually picks class III or IV due to more potential tax deductions.
However, during the Corona crisis, the partner doing short-time work should pick the lower-taxed class (class III or IV) to benefit from more short-time working compensation. The reason is that the calculation of short-term working compensation is based on the net salary, which is higher when choosing a tax-privileged class.
