According to the BMF letter, taxpayers verifiably, directly and not insignificantly affected by the fall out of the coronavirus can apply for a deferral of taxes (Steuerstundung) already due or due by 31 December 2020. In the application, taxpayers must set out their circumstances. Each individual tax office has been enabled to grant deferrals of tax debts more easily by not having to reject the applications because taxpayers were unable to prove in detail why minor revenues were incurred. Nevertheless, the applications should be carefully handled and the most recent business developments should be described as specifically as possible in order to justify to the tax authorities that the level of "merely″ indirect concern has already been exceeded. The reason: if only indirectly affected, the facilitating regulations do not apply.
According to the letter from the Federal Ministry of Finance, the charging of deferral interest (Stundungszinsen), which is generally due, can be waived. Because some federal states have already announced this policy, the deferral request should be formulated accordingly.
In regard to the deferral, the BMF letter refers to all taxes administered by the federal states' fiscal authorities on behalf of the federal government, which include income tax (Einkommensteuer), corporate income tax (Körperschaftsteuer) and value-added tax (VAT, Umsatzsteuer). The provisions of the deferral have no direct impact on trade tax (Gewerbesteuer). Deferral is the responsibility of the respective municipality where applications must also be submitted.
For the purposes of income tax, corporation tax and trade tax, it is also possible to adjust advance payments until 31 December 2020. If the tax office determines the trade tax base amount for the purpose of advance payments, the municipality concerned is bound by this when determining its trade tax advance payments. For the adjustment of the advance payments, it is necessary – as in the case of a deferral – that the applicant prove that he is directly and not insignificantly affected by the impact of the coronavirus. It should also be possible to reduce advance payments retroactively under certain conditions, such as for the first quarter of 2020. In this case, reimbursements may be possible.
Requests for deferral of taxes due after 31 December 2020 and requests for adjustment of advance payments which only concern periods after 31 December 2020 must be specifically justified in accordance with current administrative instructions. Further information will likely be provided in due course.
If enforcement debtors in form of taxpayers are directly and not insignificantly affected by the effects of the coronavirus, tax authorities should waive enforcement measures (regarding income, corporate and value-added tax) and statutory late payment surcharges (Säumniszuschläge) until the end of 2020.
Tax deductions such as wage tax and withholding taxes (tax deductions within the meaning of Section 222 Sentences 3 and 4 of the German Tax Code) cannot be deferred. For those amounts, however, it is generally possible to file an application for a stay of execution with the competent tax office.
In the case of taxes administered by the customs administration (e.g. energy tax and air transport tax), the Directorate General of Customs has been instructed to accommodate taxpayers. The same applies to the Federal Central Tax Office (Bundeszentralamt für Steuern), which is responsible for the insurance premium tax and – in that it is responsible for VAT - will proceed accordingly.
So far, the German government has not published any information on late filing tax declaration surcharges. It is to be expected, however, that the tax offices will be instructed to decide favourably on applications for extensions of time limits.
The BMF letter and the state decrees raise questions. For example, in view of the large number of industries affected, there is no doubt of the meaning "demonstrable, immediate and not insignificant concern″ by the effects of the coronavirus. The distinction between direct and indirect effects is not clear. It is hoped that tax authorities will not apply an overly strict standard, which – according to reports – seems to be the case.
A company is obliged to set down how it has been affected by the crisis, and it can do so with a current presentation of the development of turnover, accompanied by individual details of the collapse in demand. For those indirectly affected, general principles apply whereby the prerequisites for liquidity-facilitating measures are significantly higher, although not impossible.
Please do not hesitate to contact us if you have any questions regarding an application and the basis of the tax parameters where your company is located. In our opinion, the criteria for a deferral and a reduction of advance payments will have to be worked out in detail in order to obtain the benefits granted retrospectively after closer examination by the tax authorities.
Application forms of the state financial administrations
The Bavarian State Office for Taxes has issued an application form, which is intended to allow tax relief due to the effects of the coronavirus. The form contains two possible applications:
- Application for an interest-free deferral of taxes;
- Application for a reduction of advance payments (income tax and corporation tax) and the tax base for the purposes of trade tax advance payments.
The application form, which is solely the responsibility of the federal state of Bavaria, leaves some questions unanswered, especially in relation to the BMF letter and the proof requirements.
In the meantime, a similar form can be found on the homepages of most state tax authorities, such as North Rhine-Westphalia and Baden-Württemberg.
Refund of 2020 VAT special advance payment
In addition to the relief described above, some state tax authorities have announced a further measure in the area of value-added tax, which may lead to a significant and short-term improvement in liquidity. This will take the form of a refund of the special VAT advance payment (Umsatzsteuer-Sondervorauszahlung) already made for 2020 and applicable in cases of permanent extension (Dauerfristverlängerung). The special VAT prepayment regularly amounts to 1/11 of the total of all prepayments (including special prepayment) of the previous year.
This measure is not included in the BMF letter and there is currently no coordinated, nationwide uniform solution. However, the state of North Rhine-Westphalia has already published an "Introduction″ on this subject on the Internet. The states of Hessen and Bavaria have also announced the reimbursement in press releases, and other state tax authorities could follow this procedure and grant applications.
As a precautionary measure, the applications should be accompanied by a statement of reasons to sufficiently demonstrate the taxpayer's current concern.
Relief from the state tax authorities with regard to deadlines
The Federal Ministry of Finance advises taxpayers to contact the relevant tax offices in good time with regard to the above measures. However, it is to be expected that the spread of the coronavirus will also have an effect on the capacities of the tax offices. In some federal states, tax offices have temporarily closed their visitor traffic.
Please keep a careful eye on the current deadlines (submission of tax returns / tax (pre)registration, due date of tax payments, answers to inquiries of the tax office etc.) despite the corona crisis. This is because the statutory submission deadlines do not change. The expiry of deadlines can lead to disadvantages such as late surcharges and ultimately personal liability.
In several federal states (e.g. Bavaria, Berlin, North Rhine-Westphalia, Rhineland-Palatinate, Saxony) the possibility of applying for an extension of the deadline - also retroactively - with the responsible tax offices is now explicitly mentioned in connection with the effects of the corona virus. The remission of any delay surcharges already fixed may also be considered. In some cases, appropriate forms are already available online. According to reports, other federal states are to join this measure.
The tax offices should be quite generous, especially with regard to those directly and significantly affected by the Corona crisis. The applications must be conclusive and carefully justified, otherwise the extension of the deadline can be refused. Bavaria points out a possibility to extend the deadline for submission of tax returns until 31 May 2020 at the latest (in all cases advised by tax advisors for the 2018 assessment period).
Hessen has decided to extend the deadline in some cases (in particular, this does not apply to advance VAT and wage tax returns).
Please observe carefully the situation in your respective federal state against the background of your individual tax situation so that no deadlines are missed.
Other conceivable ways of improving liquidity
In addition to the above-mentioned tax procedural measures, other possibilities are conceivable for improving or conserving liquidity in the short term. In the area of value-added tax, for example, particular attention must be paid to deducting input tax as quickly as possible by means of corresponding short-term invoicing by the contractual partner. As a service provider (i.e. debit tax payer), it may be advisable to check open receivables items and – if the conditions are met – to make a tax-reducing VAT adjustment.
For more information on how you might be eligible for short-term tax relief in Germany, contact your regular CMS advisor or local CMS experts Alexander Witfeld and Finn Fechner.