Germany: Tax relief measures in legislative proposals include loss carryback and loss offsetting extensions (COVID-19)

Tax relief measures are included in draft legislation that would be intended to provide relief in response to the coronavirus (COVID-19) pandemic.

The draft bill was approved by the government on 16 February 2022. The Bundesrat can begin consideration of the bill once it is received. The next step would be consideration by the Bundestag and the Bundesrat—so it is possible that there could be amendments made during the legislative process. The bill—known in English as the “Fourth Coronavirus Tax Assistance Act”—includes the first tax measures from the new government's coalition agreement and includes proposals for expansion of loss carrybacks and extension of expanded loss offsetting. The "super depreciation" for climate protection and digital assets, as announced in the government's coalition agreement is not included; however, by all accounts, a separate draft bill is being prepared.

Key points in the draft bill include:

Extension of declining-balance method of depreciation—An option to use the declining-balance method of depreciation for movable fixed assets would be extended by one year. Accordingly, assets that are acquired or manufactured in 2022 (as well as 2020 and 2021) can be depreciated by up to two and a half (2.5) times the depreciation on a straight-line basis, but 25% annually at most.

Extending loss utilisation:

• Extending the loss carryback—The option of recognising loss carrybacks would be extended indefinitely to two years (from one year). Thus, a loss carryback would be possible in both years directly preceding the year in which the loss was incurred. This is to apply for the first time for losses that are incurred in 2022 (i.e., loss carrybacks from 2022 to 2021 and 2020).
• Extending expanded loss offsetting—The “Third Coronavirus Tax Assistance Act” raised the maximum amount of the loss carryback to €10 million and €20 million in the case of joint assessment for 2020 and 2021. These upper limits would be extended to the end of 2023, which means for loss carrybacks from 2023 to 2022 and 2021.

Extending the deadline for tax-privileged (re)investments—The deadlines for tax-privileged (re)investments pursuant to Section 6b of the German income tax law [EStG] and Section 7g EStG would be extended by another year (until 2023).

Subsidies granted for compensation for short-time work—The tax exemption for employer's grants to increase short-time allowance would be extended by six months until the end of June 2022 (from previously the end of December 2021).

"Carer bonus"—Special benefits granted by employers to employees working in specific areas (especially hospitals) in recognition of their special contribution during the coronavirus crisis (the so-called “carer bonus”) would be allowed tax-free up to an amount of €3,000 in the period from 18 November 2021 until 31 December 2022.

Extending the filing deadline for tax returns—The legislation provides for various extensions of filing deadlines for tax returns from 2020 to 2022.

Wage tax deduction in maritime transport—In order to implement the agreement with the European Commission, the register reference for merchant vessels would be expanded from Germany to include EU/EEA countries.

Read a March 2022 report [PDF 344 KB] prepared by the KPMG member firm in Germany