March 19, 2020

SMP Briefing:
Coronavirus: Which emergency measures on tax matters are in place for businesses?

I. Background

The coronavirus pandemic (Covid-19) is posing a challenge to the world not only from a medical perspective. Substantial losses in turnover and shortages in liquidity for businesses are expected in many countries.

The Federal Ministry of Finance and the Federal Ministry of Economic Affairs have jointly released a first package of measures for the support of businesses on March 13, 2020 concerning the ongoing coronavirus pandemic. Apart from liberalizations regarding the reduction of working hours and the access to public loans and guaranties, the package includes measures with respect to taxes. The main goal of these measures is to guard against shortages in liquidity and to protect jobs.

II. Measures on tax matters of the Federal Government

The tax related facilitations of the package of measures are supposed to apply independently from size and industry of the business. The package of measures is currently coordinated with the federal states. Most states, however, have already implemented the respective actions. It can be expected that the facilitations will also be implemented by the municipalities with respect to trade tax, even though they can generally not be obligated to do so by the states or the Federal Government.

The respective measures are:

1. Tax deferrals and suspension of enforcement measures

The tax authorities are supposed to grant deferrals for the tax debts of businesses under eased prerequisites if the collection of such debts would constitute an unreasonable hardship. For businesses directly affected by the coronavirus pandemic, the tax authorities can refrain from imposing late payment penalties and enforcement measures (e.g. seizures of accounts) until December 31, 2020.

2. Adjustment of tax prepayments

Furthermore, the reduction of tax prepayments is supposed to be simplified. If a business is expecting lower revenues due to the crisis, the tax prepayments can be reduced upon request in a quick and uncomplicated manner if necessary up to an amount zero.

3. Customs authorities and Federal Central Tax Office

Comparable facilitations are in place for taxes which are administered by the customs authorities and the Federal Central Tax Office. Particularly, this includes energy tax, air traffic tax and insurance tax.

III. Other tax regulations which could offer relief

In addition to the depicted facilitations, there are measures under general tax law to be considered for taxpayers. In any event, it is advisable to contact the competent tax authorities prematurely and coordinate possible measures.

1. Extensions of deadlines and „restitutio in integrum"

Due to temporary shutdowns of businesses and increased home office activity of employees it is possible that tax filing deadlines are missed, particularly with respect to monthly due (preliminary) tax returns. This could lead to penalties, which would burden the liquidity of a business even more. Section 109 of the German General Fiscal Code provides for a possibility to extent such deadlines, even retroactively. For retroactive extensions, the law specifies that these are to be granted if holding on to the legal consequences of the missed deadline would be unreasonable.

Furthermore, Section 110 of the German General Fiscal Code includes the possibility of restitutio in integrum upon request. Hereafter, a taxpayer who missed a deadline without his fault is treated as if he had not missed the deadline.

2. Remission for equitable reasons

Section 227 of the German General Fiscal Code allows tax authorities to remit in full or in part claims arising from the tax debtor-creditor relationship where a collection would be unreasonable given the current circumstances. It is also possible for amounts already paid to be refunded or credited.

 IV. Future prospects

The Federal Government has announced that after the first package of measures, further measures supporting the economy will follow. Additionally, it is expected that it will substantiate the measures already announced, e.g. by a respective directive of the Federal Ministry of Finance.

Our colleagues are happy to answer your questions about this topic. Naturally, we will update you about further developments concerning tax measures with respect to the coronavirus pandemic.

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