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With COVID-19/SARS-CoV-2 progressing at an ever faster rate and bringing entire economies to a standstill, the German tax authorities are now trying to help affected companies with tax relief. Urgently needed liquidity shall be spurred by deferring taxes without interest, reducing advance payments, and waiving enforcement measures.
According to the German Federal Ministry of Finance, taxpayers who can prove they are directly and not only insignificantly affected by the Corona crisis can explain their circumstances and apply until 31 December 2020 for deferral of taxes already due or becoming due by this date. They may also apply for adjustments of advance payments of income and corporation tax. In such cases, interest on the deferral will not be charged. For trade tax, taxpayers who are not only insignificantly affected by the coronavirus may also apply for a reduction of advance payments for trade tax purposes. In the case of the taxes regulated by federal law and administered by the customs administration (e.g., energy tax and air transportation tax), the main customs offices also have been instructed to meet taxpayers' needs in an appropriate manner in order to avoid undue hardship on them. The same applies with regard to insurance and turnover taxes. Applications for tax deferral must be submitted by 31 December 2020. Official application forms can be downloaded on the websites of the state tax authorities.
Abstention from Enforcement
Additionally, taxpayers, who filed a successful application, will be exempt from enforcement measures until 31 December 2020 for all taxes in arrears or due by that date. Any late payment surcharges for these taxes forfeited in the period from the publication of the letter until 31 December 2020 shall be waived.
Deferral of Social Security Contributions
Measures have been proposed that would enable companies to apply for a deferral of social security contributions. However, it is not yet certain whether these additional measures will actually be adopted.
Conclusion and Outlook
The tax measures adopted are welcomed. However, a successful application for such tax relief will depend on a company's accurate presentation of both its legal/tax situation and the effects of the current crisis on its cashflow. Therefore, we recommend preparing the relevant applications at an early stage in order to take advantage of the tax liquidity support. In addition to the measures described above, companies should also discuss with their tax and legal advisors the options currently available under the law for tax relief or tax deferral.
Arnold & Porter is closely following current legal developments and is available to advise on the eligibility for these programs and in any subsequent challenges or disputes.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.