Promotion of tax relief for people affected by the coronavirus crisis

By letter dated 9 April 2020, Germany’s Federal Ministry of Finance announced further tax measures relating to the coronavirus. The main purpose of these measures is to provide tax support and relief to supporters of those affected by the coronavirus crisis.

Key aspects:

  • A simple bank statement is sufficient as proof of donation
  • The obligation to use funds for non-profit organisations will be selectively waived for special campaigns
  • The provision of medical supplies or personnel for medical purposes free of charge need not be a free benefit
  • Non-profit organisations can use their funds outside the original purpose of their articles of corporation to support those affected by the coronavirus crisis

Contributions and payments from business assets can be deducted as operating expenses.

We need to commit “to social cohesion, to halting the spread of the pandemic and to those for whom everyday activities suddenly present unprecedented risks.”

These rules of equity and simplification apply to all support measures implemented in the period from 1 March 2020 until 31 December 2020.

A simplified proof of contribution applies to all special accounts set up to support those suffering from the effects of the coronavirus. A payment receipt (e.g. bank statement) is therefore sufficient proof of the donation, regardless of the contribution amount. This also applies if the donation is initially transferred to another account belonging to the recipient because a special account is not yet available.

Please refer to the Federal Ministry of Finance’s letter for the special features concerning trust accounts.

By way of exception, tax-privileged corporations are permitted to use their funds for purposes not provided for in the articles. Funds collected through special campaigns for those affected by the coronavirus crisis can be used to support those affected by the coronavirus crisis without the need for the corporation to amend its articles.

In addition, other funds at the disposal of the corporation can also be made available to those affected by the coronavirus crisis without this being detrimental to the tax concessions. However, this applies only insofar as the funds are not subject to any other binding effect.

The transfer of funds to another tax-privileged corporation that supports those affected by the coronavirus crisis is also not detrimental to the tax concessions.

The provision of personnel, premises, materials and other services free of charge by tax-privileged corporations can be assigned to the dedicated activity if they are necessary to cope with the impact of the coronavirus crisis.

If applicable, the tax exemptions of Section 4 no. 14, 16, 18, 23 and 25 of the German Value Added Tax Act (UStG) will also apply for the provision of personnel, materials and premises. This must be reviewed on a case-by-case basis.

In addition, where medical supplies and personnel are made available free of charge, taxation of the free benefit is waived, provided that the institution in question makes an indispensable contribution to the management of the crisis.

Until 31 December 2020, losses in taxable business operations or in asset management can be offset against income or profit in the non-material area, from dedicated activities, from asset management or economic business operations, if the losses can be proven to have arisen due to the coronavirus crisis.

Furthermore, no check will be carried out to assess whether the application of funds is in line with the purposes under the articles if all employees receive a uniform increase in short-time working allowance from the funds of the tax-privileged corporation. Nor will a check be carried out to assess whether the increase is at the usual market rate and appropriate.

Furthermore, it is not detrimental if lump sums for volunteers or trainers continue to be paid even though it is not or only partially possible to carry out the activity due to the crisis.

If expenses for the support of people suffering from the effects of the coronavirus crisis are paid as part of a sponsorship, they are deductible as operating expenses. In this case, the sponsoring taxpayer must be seeking economic benefits, for example, that public attention is drawn to their services.

If services are provided free of charge to an affected business partner in order to maintain the business relationship, the expenses are fully deductible as operating expenses.

The contribution of economic goods or other operational uses and services (except money) can also be deducted as operating expenses.

If employees choose to have a deduction taken from their wages by their employer and paid directly into a charity account, this amount is tax-free. This only applies if the employer actually makes the charitable donation and meets the associated documentation obligations.

The same applies in turn if a member of the supervisory board waives payment of their supervisory board remuneration.

The tax exemptions under Section 13 (1) no. 16 and 17 of Germany’s Inheritance and Gift Tax Act (Erbschaftsteuer- und Schenkungsteuergesetz – ErbStG) apply to gifts, provided the relevant conditions are met. In short, these include contributions for church, charitable or non-profit-making purposes.

Further links: