Due to the Corona crisis, employers can grant their employees special payments of up to 1,500 euros tax-free in the form of grants and benefits in kind until the end of 2020. Read here what you have to pay attention to.
The Federal Ministry of Finance (BMF) initially announced the tax exemption by decree (BMF, letter of April 9, 2020, IV C 5 - S 2342/20/10009: 001).
In the interests of legal security, a statutory legal basis for the tax exemption of the Corona special services was subsequently created within the framework of the Corona Tax Aid Act with Section 3 No. 11a EStG. In the meantime, a revised decree has been published for the application of the regulation (BMF, letter of October 26, 2020, IV C 5 - S 2342/20/10012: 003).
The new regulation covers special benefits that employees receive between March 1 and December 31, 2020.
The prerequisite is that the aid and support are provided in addition to the wages owed anyway. Conversion of remuneration is therefore excluded.
The tax authorities have presented further details in an extensive FAQ catalog (BMF, FAQ "Corona" (Taxes), as of September 24, 2020).
Tax exemption only applies to special payments in connection with the Corona crisis
First and foremost, the generous tax exemption is intended for personnel who are particularly challenged in times of crisis. Because the application of tax law cannot be separated by occupation, the tax exemption ultimately applies to all special payments in all industries, provided the requirements are met. But this should include a connection with the Corona crisis .
An agreement on special payments that was made before March 1, 2020 without a reference to the Corona crisis, cannot subsequently be converted into a tax-free allowance or support to alleviate the additional burden caused by the Corona crisis . The time of March 1, 2020 is decisive, since only from this point in time can the cause lie in the alleviation of the additional burdens caused by the Corona crisis. Employer benefits that are based on a contractual agreement or other legal obligation that were made before March 1, 2020 cannot be granted tax-free.
If there were no contractual agreements or other legal obligations on the part of the employer to grant a special payment before March 1, 2020, tax-free aid or support to alleviate the additional burden caused by the corona crisis can be granted instead of the special payment, provided the other requirements are met.
In all cases, however, it is necessary that the contractual agreements between the employer and employees show that they are tax-free aid and support to alleviate the additional burden caused by the corona crisis.
Tax-free corona special payment also for part-time and marginally employed
Tax-free grants and support can be given to all employees up to an amount of 1,500 euros. This applies regardless of the extent of employment (part-time employment) and of whether and to what extent * short-time allowance is paid. Such an allowance can also be granted to marginally paid employees . There is also no distinction between services provided by public or private employers.
Aid of up to 1,500 euros can also be paid tax-free if (possibly exclusively) short-time working allowance was paid in the same wage payment period or in a previous wage payment period since March 1, 2020. To increase the short-time work allowance, however, the legislature has created its own tax exemption regulation (Section 3 No. 28a EStG). You can find more details on this in the article "Tax treatment of wage replacement benefits" (in German).
Employers are also free to instead of the usual taxable severance payment due to the loss of the job tax-free To provide grants and support under the above conditions.
The corona-related impact must, however, be justified in the time in which the employment relationship existed, so that severance payments that relate to employment relationships that were terminated before March 1, 2020 cannot be reclassified or converted into tax-free subsidies or support.
Prerequisite for tax exemption: in addition to the wages owed anyway
The tax-free grants and support must be paid in addition to the wages owed anyway. The tax exemption is therefore excluded, especially in the context of a salary waiver or salary conversions. A tax-free allowance or support can also be agreed in a collective agreement, a works agreement or an individual contractual agreement in addition to the wages owed anyway.
In the opinion of the BFH, additional wages already exist if this is paid for a specific purpose or in addition to the wages owed anyway (BFH, judgment of 1.8.2019, VI R 32/18, BStBl 2020 II p. 106).
According to this, a salary conversion agreed in the employment contract would not be detrimental to benefits. However, the tax authorities have substantiated this judgment with a non-application decree (BMF, letter of 5.2.2020, IV C 5 - S 2334/19/100017: 002, BStBl 2020 I p. 222). You can find more details on this in the article "Net wage optimization: financial management does not want to apply jurisdiction" (in German).
1,500 euros tax exemption per employment relationship
The 1,500 euros are a tax exemption. Employers are free to make higher special payments. However, if the requirements are met, aid and support can only remain tax-free up to an amount of EUR 1,500.
The total amount of up to 1,500 euros can be used up per employment relationship; However, this does not apply to several employment relationships in the calendar year with the same employer.
Lex specialis: priority of the special provision
The tax exemption is "lex specialis" for any special services that honor corona-related burdens and challenges and are paid out to employees between March 1 and December 31, 2020 in connection with an employment relationship. It is irrelevant which means these special benefits are financed and whether they are paid out by the employer or as wages from a third party. After that, services from public funds will also be offset against the 1,500 euros.
Obligations to record and certify the corona special payment
The tax-free services are to be recorded in the payroll account so that they are recognisable as such for the wage tax auditor and the legal basis for the payment can be checked if necessary.
The tax-free allowance or support to alleviate the additional burden caused by the Corona crisis is not to be shown on the income tax certificate for the 2020 calendar year and does not have to be stated in the income tax return.
In compliance with the above conditions, tax-free subsidies or subsidies paid are not subject to the so-called progression proviso. This also means that you do not increase the tax rate to be applied in the tax return (different, among other things, with short-time work benefits).
Corona special payment: Tax exemption results in exemption from contributions
The grants and support remain free of charge in the social security system. In principle, tax-free income is not part of wages. The social security exemption is automatically due to the tax exemption.
Even with mini-jobbers, the tax-free allowances or support are not part of the regular earnings of the mini-jobber and therefore do not lead to the permissible pay limit being exceeded. The special payment therefore does not affect the € 450 mini-job.
Extension of the period for corona special payment?
In the context of the Annual Tax Act 2020, the Federal Council has called for the tax exemption to be extended until the end of January 2021. The "Corona premium" i. S. v. Section 150a SGB XI, which is paid to certain employees in care facilities (so-called care bonus), basically falls under this tax exemption.
The nursing bonus is paid to the nursing staff with the wages paid by their employer and reimbursed by the nursing care fund (proportionally, if necessary).
The reimbursement of a second tranche of the long-term care insurance is planned for December 15, 2020. This leaves employers hardly any time for a tax-privileged forwarding to the employees. The federal government wants to examine a one-month extension.