Background
The one-time energy price allowance (hereinafter referred to simply as“EPP”) in the amount of EUR 300 is intended, according to the legislature, to provide relief to those segments of the population who typically incur travel expenses in connection with earning their income and who are facing a significant financial burden in this regard due to current energy price trends. The EPP is generally subject to tax, so the net benefit is reduced in proportion to the individual’s tax burden.
Eligibility for the Energy Price Allowance
All persons who reside or are habitually resident in Germany during 2022 (even if only for part of the year) and receive income from one of the following types of income in 2022 are entitled to the EPP :
- Agriculture and Forestry,
- Commercial enterprise,
- self-employment, or
- Income earned as an employee (e.g., laborers, salaried employees, board members, managing directors, etc.) from active employment.
Individuals who live in Germany and are employed by an employer abroad (e.g., cross-border commuters and cross-border workers, as well as local staff employed at embassies or consulates general) are also eligible for the EPP. However, in these cases, the EPP is not paid out through the employer. Eligible employees will receive the EPP only after filing an income tax return for the year 2022 with their German tax office.
Important: If a pro forma employment contract (e.g., between family members and/or close associates) is entered into solely for the purpose of obtaining the EPP (e.g., a “favors-based arrangement”), there is no entitlement to the EPP. and this may result in criminal or administrative penalties.
Retirees who, for example, Those who received no income other than pension income in 2022 are not eligible for the EPP.
Eligibility for the EPP begins on September 1, 2022. However, September 1, 2022, does not mark a cut-off date for eligibility requirements. Any person who met the eligibility requirements at any time during 2022 is entitled to the payment. Example: The employer with whom the employee is still employed under the first employment contract as of September 1, 2022 , pays the EPP. Therefore, there can be no duplicate payments in cases where an employee changes employers.
Determination of the Energy Price Allowance
Employees will typically receive the EPP via their September 2022 pay stub. Self-employed individuals and business owners typically receive the EPP through the income tax prepayment for the third quarter of 2022, which has been reduced by EUR 300 (i.e., on September 10, 2022, or shortly thereafter). In any case where an income tax return is filed for the year 2022, the tax office will review whether the taxpayer is eligible for the EPP. This means that self-employed individuals and business owners will also receive the EPP, provided they are eligible. Even employees who have not yet received their EPP from their employer will receive it based on the information they provide when they file their 2022 income tax return. No special application is required.
If you have any questions, the schütze & wirtz tax consulting team will be happy to assist you.
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 recommendations for action.
