What is the energy lump sum?
Energy crisis meets inflation: The rise in energy prices is a heavy burden for many German residents. Even before the war in Ukraine, gas and electricity prices rose 20% year by year, and fuel and heating oil by as much as 30% (Statista, February 2022). This development was massively exacerbated by the Russian war of aggression. The high energy prices have also caused producer prices to rise rapidly: In August 2022, they were 45.8% higher than in the same month of the previous year – this is the highest recorded increase since the records began being kept in 1949. This points towards an even further increase in inflation rates.
The German government launched several relief packages to help combat rising prices. The second relief package, dated May 20th, 2022, contains financial relief for all employed persons in Germany subject to income tax: A one-time allowance of 300 euros is granted to cushion rising energy prices and commuter costs.
Who is entitled to the energy lump sum?
The energy lump sum is paid out to all residents of Germany subject to unlimited tax liability and earn income from:
- Agriculture and forestry
- Trades or businesses
- Self-employed work
- Traditional employment
All persons with income from active employment are eligible. This includes:
- Salaried employees, trainees, short-term and marginal employees (mini-jobs)
- Working students or those in paid internships
- Civil servants, soldiers, and judges
- Federal or youth volunteers (FSJ, etc.)
- Cross-border commuters employed abroad with residency and unlimited tax liability in Germany
- Persons with tax-exempt wages (Lump sums for training supervisors or honorary activities)
- Persons receiving wage replacement benefits such as maternity benefits, short-term work benefits (also transfer and seasonal short-term benefits), parental allowance, sickness benefits, insolvency benefits, and compensation for lost earnings according to the Infection Protection Act (exception: those receiving unemployment benefits (ALG 1) without any additional income in 2022 don’t receive the energy lump sum due to no active employment relationship)
If you’re entitled to receive the energy lump sum, it doesn’t matter when you started at your current job or how long you’ve been working there. The lump sum is given out per person, not per job, so if you have multiple professions you will receive the lump sum from your primary employment relationship (tax classes 1 to 5).
When will the energy lump sum be paid out?
1. For employees
Those who are employed on September 1st, 2022, will receive the energy lump sum in addition to their September wages – even if you are receiving wage replacement benefits such as parental allowance, sick pay, or short-term work benefits. If your employer files quarterly wage tax returns instead of monthly, you’ll receive your lump sum with your October 2022 salary. If you received the energy lump sum from your employer, you will find the capital letter E on your 2022 income tax statement.
2. For freelancers, business operators, or income from agriculture and forestry
Freelancers will receive the energy lump sum via a one-time 300-euro reduction in their advance income tax payment for the third quarter in 2022 (as of September 10th, 2022). If you are a freelancer but also have a secondary traditional employment relationship, you will receive the lump sum via your employer instead of the advance income tax payment in order to prevent any double payments. If your income tax prepayment doesn’t exceed 300 euros, you won’t have to make any payments at all and will receive the remaining amount via your 2022 tax return.
Receiving your lump sum with your tax return
There are a few cases that might lead you to not receiving your energy lump sum until you file your 2022 tax return, for example:
- You were not employed on September 1st, 2022 (but instead earlier or later in the year)
- Your employer either doesn’t file a wage tax return or only file annually (due to only employing workers on a mini-job basis or income tax due is low to none)
- If you’re a freelancer and your advance income tax payment hasn’t yet been assessed
All 2022 tax returns will automatically be checked for energy lump sum eligibility, you don’t have to individually apply for it. If you’re granted the lump sum with your tax return, it’ll be deducted from your assessed income tax or, if applicable, the excess amount will be refunded to you.
Is the energy lump sum taxed?
Yes. The energy lump sum is exempt from social security contributions, but is still subject to income tax. Your individual tax rate determines the amount of net income that you’ll receive from the lump sum. The lump sum is taxed as “additional earnings” (sonstiger Bezug) for traditional employees while it is treated as “other income” (sonstige Einkünfte) for freelancers. Mini-jobbers who don’t earn any additional income do not have to pay tax on the energy lump sum.
Can I receive the lump sum and the one-time payment for recipients of transfer benefits?
Yes. If you received the one-time payment for recipients of transfer benefits (Transferleistungen), both the energy lump sum and the one-off transfer payments will be paid out to you. The lump sum is also not offset against social benefits such as Hartz IV.
What about students and retirees?
Students and retirees were not included in the second energy price relief package, but since they as well suffer from increasing energy prices, improvements were made in the third relief package: Now, students and retirees will receive the lump sum as well. The German Pension Fund will pay retirees their 300 euro energy lump sum on December 1st, 2022. This will be taxed the same way as it is for employees.
Students are expected to receive an energy lump sum of 200 euros, but it hasn’t yet been clarified exactly how or when it will be paid out. It is likely that the payment will be made in the beginning of 2023.