Germany: Fourth coronavirus tax assistance act (COVID-19)
New measures as well as extensions of existing measures included in fourth coronavirus tax assistance act
New measures included in fourth coronavirus tax act
The Bundestag on 19 May 2022 adopted the Fourth Coronavirus Tax Assistance Act to implement tax relief measures for coping with the coronavirus (COVID-19) pandemic. The legislation includes new measures as well as extensions of existing measures.
Following adoption by the Bundestag, the Bundesrat still has to approve the law, and then it must be promulgated in the Federal Law Gazette. The Fourth Coronavirus Tax Assistance Act includes the first tax measures from the new German government's coalition agreement, including expansion of loss carry-backs and extension of expanded loss offsetting. The "super depreciation" for climate protection and digital assets, announced in the government's coalition agreement is not included, but “is being elaborated upon” to bring it to fruition.
Key provisions of the legislation include:
- Discounting of non-interest bearing liabilities: The obligation under tax law to discount non-interesting bearing liabilities with a remaining term of more than 12 months would be abolished. Previously, such liabilities were required to be discounted at an interest rate of 5.5% in the tax balance sheet, resulting in taxable income. Irrespective of whether they are interest-bearing or non-interest bearing, liabilities would be stated at acquisition/production cost or an equivalent value (i.e., nominal value or repayment amount) under the new rule.
- Extension of declining-balance method of depreciation: The option of using 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 (currently only in 2020 and 2021) could be depreciated by up to two and a half times the depreciation on a straight-line basis, but 25% at most.
- Loss utilization:
- Extending the loss carry-back: The option of recognizing loss carry-backs would be extended indefinitely from one to two years, effective for losses incurred in 2022 and thereafter.
- Extending expanded loss off-setting: The Third Coronavirus Tax Assistance Act raised the maximum amount of the loss carry-back 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 (i.e., for loss carry-backs 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 Act [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 (formerly 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 pandemic would be allowed tax-free up to an amount of €4,500 during 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 2024.
- 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 June 2022 report [PDF 1.2 MB] prepared by the KPMG member firm in Germany
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