As already reported in TAX WEEKLY # 10/2020, the German government announced on 13 March 2020 that in view of the economic impact of the consequences of the corona pandemic, companies should be helped by liquidity-saving tax enforcement. Specifically, this concerns deferral, reduction of advance payments and waiver of enforcement measures.
Tax liquidity aid for companies
In a letter from the Federal Ministry of Finance dated 19 March 2020, the tax authorities have now published the provisions relating to deferral and enforcement measures and to the adjustment of advance payments for taxes administered by the state tax authorities on behalf of the Federal Government. Subsequently, the following applies:
- By 31 December 2020, taxpayers who can prove that they are directly and not insignificantly affected may submit applications (on presentation of their circumstances) for deferral of taxes already due or coming due which are administered by the state financial authorities on behalf of the federal government. They can as well submit applications for adjustment of advance payments of income and corporation tax. These applications are not to be rejected on the grounds that the taxpayers are not able to provide detailed evidence of the value of the damage caused. No strict requirements are to be set when reviewing the conditions for deferral. Deferral interest can generally be waived. Sec. 222 para. 3 and 4 of the fiscal code (AO) remains unaffected (Note: Wage tax and dividend tax can therefore not be deferred).
- Applications for deferral of taxes due after 31 December 2020 as well as applications for adjustment of advance payments which only concern periods after 31 December 2020 must be justified specifically.
- If it becomes known to the tax office on the basis of information from the judgment debtor or in any other way that the judgment debtor is directly and not insignificantly affected, enforcement measures shall be waived until 31 December 2020 for all taxes in arrears or coming due by that date as defined in paragraph 1. In the cases in question, the late payment fines imposed in the period from the date of publication of this letter until 31 December 2020 shall be waived in respect of these taxes as at 31 December 2020. The tax offices can regulate the waiver by general disposition (sec. 118 para. 2 of the fiscal code (AO)).
- The general principles apply to those indirectly affected.
Trade tax measures
Furthermore, according to identical decrees issued by the supreme tax authorities of the federal states on trade tax measures to take account of the effects of the coronavirus of 19 March 2020, tax offices, when determining the trade tax base for the purposes of advance payments (sec. 19 (3) sentence 3 of the Trade Tax Law (GewStG)) can initiate the adjustment of trade tax prepayments for the current collection period if it is aware of changed circumstances with regard to trade income.
Companies must apply for deferrals of trade tax to the relevant municipality. Hopefully, the local authorities will also take the effects of the coronavirus into account and approve corresponding deferral applications in an uncomplicated manner. Business organizations have already publicly appealed to local authorities in this regard.
Practical information
Applications for reductions in advance payments or trade tax assessment base for the purposes of trade tax advance payments must be aligned with the fixed advance payment dates. In order to ensure timely processing, applications should be submitted well in advance of appropriate deadlines. As regards the types of tax administered and enforced by the federal states, the next deadlines are 15th May (trade tax) and 10th June (income and corporate tax).
Deferral applications are to be based on the respective due dates of the taxes (in particular, in the case of VAT, on the deadlines for submitting preliminary VAT returns). If necessary, automatic direct debit can be avoided as a form of precaution by revoking any direct debit authorizations granted.
Particularities of the Free State of Bavaria
In Bavaria, a form was published a few days in advance, by means of which the interest-free deferral of tax payments and the reduction of advance payments or the tax assessment amount for the purposes of trade tax advance payments can be applied for quickly and non-bureaucratically at the tax office (see TAX WEEKLY special issue of 17.03.2020). It is however also to be noted that incorrect information in such applications may lead to criminal prosecution. A prerequisite for this are impairments due to the effects of the coronavirus.
- According to this form, the interest-free deferral is initially scheduled for three months. It can be applied for with the form at the tax office, in particular for taxes already due or coming due, which are administered by the state tax authorities on behalf of the federal government. This applies in particular to income tax, corporate income tax (including subsequent and advance payments) and VAT. However, wage tax and dividend tax cannot be deferred.
- The reduction of advance payments can be requested from the tax office using this form for income tax and corporation tax. With regard to trade tax, the reduction of the trade tax assessment base for the purposes of advance payments of trade tax can be requested. This also indirectly results in a reduction in advance payments of trade tax by the municipality.
- Upon application, the Free State will waive enforcement measures in cases directly affected by the consequences of the Corona pandemic, probably until the end of the year. The application must be submitted to the responsible tax authority. There is no form for this.
The completed form can be sent to the tax office in various ways:
- In writing by mail or by dropping it in the mailbox of the tax office
- By Fax
- By Email (Note: the risk of reading by unauthorized third parties is borne by the applicant in this case).
The tax authorities kindly ask you to always use the form provided for this purpose for deferral and reduction applications and to fill it in accurately. If both a deferral application and a reduction application are filed, the application should be submitted in duplicate, as two work areas must be served in the offices.
In a press release dated 17 March 2020, the Bavarian Minister of Finance Füracker also states that - insofar as there are organizational problems in submitting tax returns on time due to the pandemic - help will also be provided here.
"The Bavarian tax offices will be generous and as non-bureaucratic as possible with applications for deadline extensions because of Corona", Füracker announced. In particular, this also means that the deadlines for submitting wage tax returns and preliminary VAT returns can be extended by one month with effect for the respective payment dates. A considerable hardship in terms of the company's liquidity should not be a prerequisite for this, but rather personnel or technical bottlenecks due to the corona crisis. It is to be hoped that this example will also be followed in other federal states.
With regard to wage tax, the form on the website of the Bavarian State Office for Taxes also contains the statement that tax deductions within the scope of Sec. 222 para. 3 and 4 fiscal code (AO) (wage tax and dividend tax) cannot be deferred. For tax deductions, however, it is possible to submit an application for a stay of execution to the responsible tax office. It must be taken into account that in the case of judgment debtors who are directly and not insignificantly affected, the default fine forfeited in the period from the date of publication of the abovementioned Federal Ministry of Finance letter (19 March 2020) up until 31 December 2020 must be waived as of 31 December 2020. A liquidity effect comparable to that of an interest-free deferral could possibly be achieved by a stay of execution without late payment fines.
Accompanying measures in Hesse and NW
To accompany the benefits in the area of deferral and enforcement measures, the tax authorities of the states of Hesse and North Rhine-Westphalia have also established support measures for the advance payments due to permanent extensions of the deadline for submitting preliminary VAT returns:
- Hesse grants the possibility of having advance payments already made refunded at short notice by means of an informal application. This should lead to a relief for the companies in the amount of about 1.5 billion Euros.
- The Ministry of Finance of the State of North Rhine-Westphalia has issued instructions to this effect and recommends that affected entrepreneurs use the form "Application for permanent extension - Registration of advance payment" to ensure that the application is processed quickly.
Directorate General of Customs and Federal Central Tax Office
In the last TAX WEEKLY #10/2020 on the Federal Ministry of Finance's and the Federal Ministry for Economic Affairs and Energy's package of measures to mitigate the effects of the coronavirus, we also already pointed out that in the case of taxes administered by the customs administration (e.g. energy tax, air transport tax and also import VAT), the General Customs Directorate has been instructed to offer the taxpayer appropriate assistance. The same applies to the Federal Central Tax Office.
The Directorate General of Customs has already reacted accordingly and published the following approach:
- Applications for deferral for taxpayers who can be shown to be (directly or indirectly) and not inconsiderably affected can be submitted until 31 March 2020, stating their circumstances. The taxes must already be due or coming due by that date. Applications for deferral of taxes due after 31 March 2020 must be specially justified.
- Until 31 March 2020, taxpayers who are provably (directly or indirectly) and not insignificantly affected may submit an application for adjustment of the previously determined advance payments, stating their circumstances.
- If there is a current threat of enforcement measures, a stay of execution can be applied for by explaining the current situation of the judgment debtor.
If you are affected by the effects of the Corona crisis, you should contact the responsible main customs office. In order to ensure a speedy processing of applications, applications should be duly justified and the link with the Corona crisis
should be credibly presented. The main customs offices will process applications as forthcoming as possible. Customs does not (yet) offer a form for these applications.
