The Corona pandemic has changed our daily life in recent months and has severely restricted it for most of us. Fortunately, worst times seem to be over and our daily life can return to normal. The Federal Government is trying to support us with a large-scale 130 billion Euro stimulus package 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.
VAT reduction in 2020
Starting 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. We pass this reduction on to you!
We at wundertax do not want to keep this 3% VAT reduction to ourselves, but pass it directly on to you. As a result, you can submit all your tax returns with us for a reduced price until the end of the year. At check-out you can redeem the 3% VAT discount voucher.
300 Euro additional child benefit (Corona grant)
As part 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 instalments of 200 Euro in September and 100 Euro in October.
Environmental bonus for the purchase of climate- and environment-friendly electric vehicles
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 net list price of up to 40,000 Euro. For the time being, the subsidies will be eligible until 31.12.2021.
Secure your Corona special payment of up to 1,500 Euro tax-free
The Federal Government wants to support companies and employees in this difficult Corona period. In order to do so, the option of ‘Corona’ special benefits for employees was created. Ask your employer if he is willing to support you with a tax-free extra payment during this challenging time of the Corona pandemic and short-time work.
Between 01.03.2020 and 31.12.2020, employers can grant a tax-free bonus in addition to the regular salary. It is important that this payment must be an additional benefit on top of the already existing monthly salary. Thus, it is explicitly not possible to convert an already contractually agreed payment into this tax-free special payment in order to save taxes. There are no restrictions on certain sectors or groups of employees. The Corona special payment is a one-off tax benefit, regulated by the Corona Tax Assistance Act, which the employer may grant. Further information are available here.
The Federal Ministry of Finance makes the citizen-friendly assumption, that as the Corona crisis affects us all, the general aid and support is justified within the meaning of the income tax guidelines.
Quarantine due to Corona and continued payment of salary
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 a 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.
Tax arrangements for border commuters
The Corona pandemic means that a large proportion of border commuters cannot commute to work as usual and work from home. This can lead to a change in taxation. However, now there is clarity.
The Federal Ministry of Finance informed about the tax situation of border commuters in relation to the Corona crisis on April 3rd. A few weeks later, there are now agreements with the neighboring countries of Luxembourg, the Netherlands, Belgium, Austria and France. The goal is to clarify the tax situation of the employees concerned. Consequently, due to Corona a higher proportion of home office days does not have negative tax effects on the persons concerned due to a change in the distribution of tax rights. As a result, working days at home due to the Corona pandemic can be billed as normal working days in the neighboring country.
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 of 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-privileg class.
Parents receive 7% more in short-term working compensation, which only applies for tax classes III and IV. Therefore, we would strongly advise parents in tax class V to change to one of the aforementioned classes. One of the reasons for that to occur is the fact that in tax class V there is no tax deduction for kids. This only appears in the partner’s income tax certificate with tax class III. It is important to keep in mind that a tax class change will be applied for the next month earliest and cannot be applied retrospectively. On a positive note, since 2020 it is possible to switch tax classes multiple times within a year.
As an easier alternative for this year, the government allows to only hand over a copy of the income tax certificate with tax deductions for kids to the employer.
An increase of the short-time working compensation
Employers, who are severely hit by the economic crisis and have no use for their production capacity, file for short-term employment so that the government takes up part of the labor costs. Despite challenging economic circumstances, employers want to support their employees as much as possible. If the situation allows it, most employers can add up to 100% of net compensation on top of the short-term working compensation, which is provided by the government.
Until now, that extra compensation by the employer was taxed. 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. 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.
Mandatory tax return when receiving short-time working compensation
Short-time working compensation in general is tax free. Still, in the following year after receiving it, the law requires you to file a tax return. The reason for that is the so called Progressionsvorbehalt (proviso safeguarding progression clause). 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.
Download the Corona Warning App and help prevent another Corona wave
Since mid-June 2020, the Federal Government’s Corona Warning App is available for download in Apple’s App Store and Google’s PlayStore. After a long time of political back and forth over jurisdiction, data protection and functionality, the app is finally available. Download it now and help prevent another Corona wave.
Corona emergency aid for students: Secure up to 500 Euro p.m.
Students in particular can be affected by the Corona crisis, as they often make a living from a part-time job. These student side jobs such as temporary help or service in restaurants or retail outlets were temporarily no longer needed during the lock-down. Additionally, working as tutor for school kids, in a gym as fitness trainer or as working student in a company was also superfluous or prohibited subject to the contact ban. To support these affected students, there is now a Corona emergency aid for students.
The Federal Government has set up a monthly bridging aid of up to 500 Euro for students in need due to the Corona crisis. The amount of emergency assistance depends on the bank balance on the day before the application is made. The aid can be requested for the months of June, July and August and does not need to be repaid. Students can submit an application on the Student Help Association (Studentenwerk) webpage. The application has to be submitted monthly and is reviewed repeatedly based on the actual data.
Anyone, who had a part-time job in pre-Corona times, which has broken away, or students, whose parents are affected themselves and can now contribute less money to the student’s living, is eligible to apply for federal support. It is important that the application must be substantiated. It is best to include proof such as a letter of termination from the employer. In addition, the bank statements of the past months must be presented so that the Studentenwerk can check the existence of previous income.
Corona emergency aid is intended for students of all state or state-recognized universities. It doesn’t matter in which program (first or second degree) the student is in as long as it is not part-time studies. Furthermore, age, nationality or whether you are entitled to receive Bafög do not matter.