Tax policy measures

Germany’s Federal Ministry of Finance has announced numerous tax policy measures to improve the short-term liquidity of companies. These include the possibility of deferring tax payments, reducing advance payments and partially suspending enforcement. The details and options for improving liquidity can be found here.

Key aspects:

  • A deferral can be requested for tax amounts due or becoming due. Deferral interest is to be waived
  • Applications for adjustment of advance payments may be simplified
  • Enforcement measures of all taxes due may be suspended

Tax relief is available to all taxpayers who can prove that they are directly and significantly affected by the coronavirus. The measures are intended to preserve liquidity by deferring tax payments and improving liquidity through early tax refunds/reductions.

For tax deferrals and refunds due by 31 December 2020, there are no strict requirements in place to provide evidence of financial difficulties caused by the coronavirus. If tax payments are to be deferred beyond 2020, more precise reasons will need to be given.

Provided that the above conditions are met, the tax authorities offer the following tax support in coordination with the federal states:

Applying for deferrals will be made easier. Without the need for further evidence and upon written application, deferrals are to be granted for income tax, corporation tax, trade tax and value added tax due or becoming due. Deferral interest is generally to be waived. Payroll tax cannot be deferred at present. Written applications can be made informally. Many states provide forms on their websites (e.g. see link below for the North Rhine-Westphalia tax authorities).

Furthermore, advance tax payments may be slightly reduced. Insofar as income in 2020 is lower than expected, an application can be made for a reduction in advance tax payments for 2020.

Until 31 December 2020, enforcement measures (e.g. seizure of accounts, late payment penalties) are to be waived provided the taxpayer notifies the tax authorities in writing of their deteriorating situation.

An increasing number of states (such as North Rhine-Westphalia) are also reducing the special advance payments for long-term extensions of VAT to zero for companies affected by the coronavirus crisis upon request. The reimbursement of the special advance payment has no influence on the permanent extension granted.

Finally, we would like to point out once again that the tax authorities intend to grant the above measures only to taxpayers who are in economic difficulties due to the current situation. These measures are not intended for companies that are not explicitly affected by the impact of the coronavirus. Please note in particular that making false statements may be considered to be tax evasion and may result in criminal prosecution. In view of this, we urgently recommend that you carry out a thorough assessment as to whether the above conditions for deferral or reduction of taxes are met before submitting an application.

Further information