Economic stimulus package of the German Government: Measures at a glance

The German Federal Government agreed yesterday, June 3, 2020, on measures to stimulate the German economy as a response to the implications of the Coronavirus-epidemic. The measures have still to pass through legislative procedures.

In the following, a selection of planned tax-related measures is summarized.

  • Reduction of value added tax: From July 1 to December 31, 2020, the VAT rate is to be reduced from 19% to 16% (standard rate) and from 7% to 5% (reduced rate).
  • One-time children bonus: A one-time children bonus of EUR 300 per child shall be paid out. The children bonus will be netted off with the children allowance in the annual income tax return.
  • Introduction of declining balance method depreciation: With a factor of 2.5 compared to the currently applicable depreciation and a maximum of 25% per year for movable fixed assets, declining balance method-depreciation will be introduced for fiscal years 2020 and 2021 to stimulate investment.
  • Due date of import turnover tax: The due date of the import turnover tax will be extended to the 26th of the following month. Hereby, liquidity of businesses should be supported.
  • Changes in vehicle tax:
    • Vehicle tax for cars will be geared more towards CO2 emissions. For new car registrations, the assessment basis as of January 1, 2021 should therefore mainly refer to the CO2 emissions per km and be increased in stages above 95g CO2 / km.
    • The existing ten-year motor vehicle tax exemption for pure electric vehicles will be granted until December 31, 2025 and extended until December 31, 2030.

Additional non-tax measures in the economic stimulus package include among others,

  • capping social security contributions to a maximum of 40% by 2021.
  • A regulation for the receipt of short-time work (Kurzarbeit) benefits from January 1, 2021 will be presented shortly.
  • The purchase of more climate-friendly trucks, airplanes and ships will be promoted and purchase premiums for the purchase of climate and environmentally friendly electric vehicles will be doubled.
  • Small and medium-sized enterprises (SMEs) that do not reduce their apprenticeship places (Lehrstellen) in 2020 compared to the previous three years should receive a one-time bonus of EUR 2,000 for each new apprenticeship contract that is paid out after the probation period has ended. Companies that increase the offer receive EUR 3,000 for the additional apprenticeship contracts. SMEs that continue their apprenticeship activity despite corona-burdens and do not bring training supervisors or apprentices into short-time work (Kurzarbeit),
    should be able to receive funding. Companies that also take on apprentices who cannot continue their apprenticeship due to the insolvency of their apprenticeship company should receive a takeover bonus.
  • Insolvency proceedings will be reduced to 3 years for individuals. The shortening should be limited for consumers and the application behavior of debtors will be evaluated after a reasonable period of time, also with regard to any negative effects on payment and economic behavior.

Please contact us.

Source: Decision paper dated 3 June 2020 (in German language), Haufe

Photo: Marius Serban, Unsplash

Disclaimer: We assume no liability for the accuracy of the information. The information listed here does not constitute recommendations for action.

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