COVID-19 & taxes
Taxes – particularly those payable in advance, such as trade tax or income tax for freelancers and the self-employed, as well as corporation taxes for companies – frequently pose an existential threat to large and small businesses even during normal times. With the coronavirus spreading rapidly, measures that allow for the flexible payment of contributions in installments and the deferral of deadlines are being introduced to ease the burden on businesses.
Tax relief is a key component of the German federal government’s protective package in response to the coronavirus. A recent circular released by the German Federal Ministry of Finance in coordination with the Länder, i.e. Germany’s federal states, sheds light on all the fiscal elements that can be drawn on to help manage the crisis.
It specifically addresses the following:
- Deferral of tax payments (corporation, income, and sales taxes)
- Adjustment of tax prepayments
- Suspension of enforcement measures
- Adjustment of the trade tax assessment base
Businesses that find themselves unable to afford tax payments due to the coronavirus pandemic will be able to apply to have these payments limited and generally deferred without having to pay interest. They have until December 31, 2020 to submit an application to their tax office. There are no strict requirements.
Businesses, freelancers, and the self-employed can apply to the relevant tax office to have tax prepayments and the assessment base for trade tax adjusted. We at the commercial law firm MTR Rechtsanwälte note that if it can be clearly demonstrated that a taxpayer’s income is lower in the current year than was expected before the crisis, the tax prepayments will be quickly and easily reduced.
Measures to enforce the recovery of overdue tax liabilities will not be pursued until the end of the year. Moreover, late payment fines incurred during this period pursuant to statutory regulations will be waived. This affects income and corporation taxes as well as sales tax.
Lawyers with experience in the field of tax law can offer advice.