The COVID-19 pandemic represents an enormous challenge for economies and societies. As a result, the German government has already launched a number of aid packages in the form of bridging assistance, economic stabilization funds and KfW loans. But what about the workers and employees in these companies that are receiving those tax advantages and measures?
This article provides an overview of important tax relief measures for employees during this pandemic.
The 'COVID Bonus'
A number of employees are working hard to provide. Since the outbreak of the coronavirus in Germany, these employees have been working under more difficult and challenging conditions, whether at cash registers in supermarkets, as nurses, doctors, or behind the wheel of a truck. Numerous employers have therefore decided to give employees bonuses.
Employers can grant bonuses up to the amount of 1,500€ (according to §3 number 11a EStG), without being subject to taxation, in the period between March 1st and December 31st in 2020. This is intended to give employers the opportunity to provide their employees with support without high additional costs. The prerequisite is that the allowances are provided to mitigate the additional burdens caused by the pandemic, in addition to the salaries paid.
Federal Minister of Finance, Olaf Scholz, said: "We are now making sure that 100 percent of the premiums reach the employees".
Tax Support for the Home Office
For all the employees who are mainly working from home during the pandemic, tax measures have also been taken to help.
For example, costs that are directly or partially related to one's office are tax deductible. Those using their own phone and internet connection for work in their home office can deduct part of the expenses. IT should be noted that employees can claim twenty percent of the respective monthly bill, but a maximum of 20€ per month can be specified as income-related expenses in their income tax return. Alternatively, the employer can also reimburse the costs as a lump sum. Other deductible costs include, for example, the subsequent furnishing, equipping or renovating of one's study or office. An area to work in from home is considered to be a 'home office' only if it's a closed room in which 90 percent of the time is for professional activities and 10 percent is for private activities. A maximum amount of 1,250€ per year applies to the study. Work equipment such as a new keyboard or similar tools can be specified.
Lastly, it's worth noting that the tax measures concerning the home office can currently only be claimed in the employers requires employees to work from home, because the office building is closed due to the pandemic for example.
Working from home voluntarily could lead to the fact that no tax refunds and deductions can be claimed. However, this regulation is currently under review. Numerous politicians are already calling for the additional costs incurred when working from home to be claimed back with the income tax without any problems. There's even talks of a planned daily flat rate, which would mean that a lump sum of 5€ per day in the home office can be deducted from taxes as income-related expenses, but no more than 600€ per year.
Short-time Work Allowance (Kurzarbeitgeld)
Many companies have lost business since the pandemic started and several revenues in different industries plummeted by more than 50 percent this year. In order to prevent companies from having to start letting people go as a result of the drop in profits, the German government already facilitated access to short-time work (Kurzarbeit) benefits on March 16,2020, that are effective from March 1. Companies can apply for short-time work compensation if at least 10 percent of the employees are affected by the loss of jobs. This way, companies can continue to support their employees even when business is rough, which would promote the sustainable stabilization of economic development. The Agency for Employment (Agentur für Arbeit) pays these benefits as partial amounts of the salaries and wages lost, due to this loss of employment and working hours. This replaces part of the lost net income. It should be noted that the increase in this short-time work depends on the duration of the short-time work itself. Previously, the Federal Employment Agency (Bundesagentur für Arbeit) paid 60 percent of the loss for childless employees on short-time work and 67 percent for parents. The "Social Protection Package II" (Sozialschutz-Paket II) stipulates that the allowance (Kurzarbeitergeld) for childless employees will be increased to 70 percent of the loss of earnings from the fourth month, and it will be increased to 80% from the seventh month onwards. For employees with children, the increase will be 77 percent from the fourth month, and from the seventh month onwards the increase will become 87%. These increases are valid until December 31, 2020, provided that the regular working hours are reduced by at least 50 percent.
On September 16, 2020, the Federal Cabinet (Bundeskabinett) decided to extend the period during which these measures will be effective, meaning that these measures are effective until the end of 2021. In some companies, employers will additionally support their employees in the form of employer subsidies (Arbeitgeberzuschüssen). This measure is intended to keep the wage gap for employees as small as possible. although this voluntary supplement was previously excluded from social security contributions, it was still subject to wage tax. The federal government now wants to change this. If the company increase the short-time working allowance (Kurzarbeitergeld) to up to 80 percent of the net pay gap (Nettoentgeltdifferenz), the additional payments will be exempt from wage tax in the future. Additionally, employers will be reimbursed in full by the Federal Employment Agency (Bundesagentur für Arbeit) for any social security contributions they have to pay for short-time work of their employees until June 30, 2021. If short-time work has been implemented in a company by June 30, 2021, then social security contributions will be reimbursed by up to 50 percent from July 1, 2021 until December 31, 2021. Also, the rules on additional income have been relaxed. From May 1, each employee on short-time work may earn up to the full amount of their previous monthly salary. Until the middle of the year, this was only permitted for employees in systemically important occupations. Now this possibility has been extended to all employees. This regulation is also limited until December 31, 2020.