Energy Price Allowance (Energiepreispauschale): important rules, also for entrepreneurs and foreigners living in Germany

Background

According to the legislator, the recently introduced one-time energy price allowance (“Energiepreispauschale”; hereinafter referred to as “EPP”) of EUR 300 is intended to relieve those groups of the population who typically incur travel costs in connection with their income generation and who are heavily burdened by the current energy price development. The EPP is generally taxable, so that the net relief is reduced in accordance with the personal tax burden.

Entitlement to the Energy Price Allowance

All persons who reside or habitually reside in Germany during the year 2022 (if applicable, also for only part of the year) (unlimited income tax liability) and receive income from one of the following types of income in 2022 are entitled to the EPP:

• Agriculture and forestry,
• Trade,
• Business self-employment, or
• Income as an employee (e.g. blue-collar workers, white-collar workers, board members, managing directors, etc.) from active employment.

Persons living in Germany and employed by an employer abroad (e.g. cross-border commuters and cross-border commuters as well as local staff employed in embassies/general consulates) also receive the EPP. However, the EPP is not paid through the employer in these cases. Corresponding employees will only receive the EPP from their German tax office upon filing an income tax return for the year 2022. Important: If only a pro forma employment contract (e.g. between relatives and/or close persons) is concluded in order to receive the EPP (e.g. “relationship of convenience”), there is no entitlement to the EPP. and there are possible consequences under criminal or fine law. Retirees who have not received any income other than pension income in 2022, for example, are not entitled to the EPP. Entitlement to the EPP arises on September 1, 2022, but September 1, 2022 does not mark a cut-off date for eligibility. Any person who has met the eligibility requirements at some point in 2022 is entitled to the payment. Example: the employer with whom the employee is still employed under the first employment relationship on September 1, 2022, will pay the EPP. Thus, there can be no double payments in cases of change of employer.

Determination of ENergy Price Allowance

Employees typically receive the EPP via the payroll in the month of September 2022. Self-employed persons and entrepreneurs typically receive the EPP via the income tax pre-payment for Q3 2022 reduced by EUR 300 (i.e., as of September 10, 2022, or shortly thereafter). In every case in which an income tax return is filed for 2022, the tax office will check whether there is an entitlement to the EPP. Thus, self-employed persons and entrepreneurs will also receive the EPP, if eligible. Employees who have not yet received their EPP through their employer will also receive it based on their information when they file an income tax return for 2022. No special application is required. If you have any questions, please do not hesitate to contact the schütze & wirtz tax advisor team. Source: Federal Ministry of Finance Photo: Frédéric Paulussen, Unsplash Disclaimer: We assume no liability for the accuracy and completeness of the information. The information provided here does not constitute a recommendation for action.