Factsheet for measure
DE-2020-13/408
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Updated
– measures in Germany
Adjusting tax prepayments
Anpassung von Vorauszahlungen
Background information
The Federal Government modified the tax law, in order to help businesses, free lancers and self-employed people with their tax payments and improve their liquidity. All companies/entrepreneurs can apply at the local tax authority office to have their tax prepayments reviewed and lowered. This measure is part of the support package to stabilise the German economy and help out firms during the COVID-19 crisis.
The package was adopted by the Federal Government at the end of March 2020.
Content of measure
The measure regards income and corporate tax. Companies, self-employed people and freelancers can ask the tax office to adjust their pre-payments. The same is possible for the measurement amount for business tax prepayments. These pre-payments are usually based on the taxpayers' income from the last year(s). With the new rules, applicants can ask for lower pre-payments as soon as they can show that their income is likely to be lower in 2020. This is part of a broader package that also includes other changes in tax law, all of them directed at easing tax burdens for companies in times of crisis; and also includes easier access to loans, start-up support or financial help for solo- or micro entrepreneurs.
Updates
The following updates to this measure have been made after it came into effect.
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31 January 2022
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On 31 January 2022, rules for adjusting tax prepayment were extended by the Federal Ministry of Finance. They are now applicable until the end of June 2022.
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28 December 2020
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In November and December 2020, the Federal Government prolonged its aid packages until the end of 2021 and added new elements. Companies negatively impacted by the COVID-19 pandemic can continue to apply for adjusted tax prepayments in 2021 (at the local tax office).
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08 October 2020
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In the latest tax estimate from September 2020, Federal Minister of Finance Olaf Scholz expects tax revenue for 2020 to decrease by €81.6 billion. In 2021, tax revenue is expected to be €19.6 billion lower than estimated in May 2020. A pre-COVID-19 tax revenue level is expected for 2022 at the earliest. It is not yet known, how many companies have asked for adjusted tax prepayments.
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Use of measure
Initially, the Federal Ministry of Finance estimated that the new tax rules would lead to a decline in tax revenues by 10% at the federal level as well as at the level of the federal states in 2020. Such a decline would equal around €64 billion. Not included in these figures are further tax losses at the municipal level.
At the end of February 2021, the Federal Statistical Office indicated a drop in tax revenue of 11.6% from February 2020 to January 2021. After a significant decline of 14.3% in September 2020, tax revenue rose until the end of the year. The September decline has been attributed to the introduction of tax aid packages related to COVID-19. In another press release from 7 April 2021, the Federal Statistical Office stated that tax revenues declined by 3.8% in 2020 (over the previous year). This decline is also attributed to the loss in revenues due to the impact of the lockdowns. In addition, the Federal Statistical Office reported at the beginning of October 2021 that business taxes declined in 2020 by 18.2% over 2019.
As announced on 3 April 2023 by the Federal Statistical office, in 2022, municipalities in Germany generated approximately generated a financing surplus of just under €2.6 billion. The surplus has decreased in comparison to 2021 when it still amounted to €4.6 billion. The energy crisis and housing refugees led to greater expenditures
Target groups
Actors and funding
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Actors
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Funding
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National government
Company / Companies
Local / regional government
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National funds
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Social partners
Social partners' role in
designing the measure
and form of involvement:
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Trade unions
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Employers' organisations
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Role
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Consulted
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Consulted
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Form
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Direct consultation outside a formal body
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Direct consultation outside a formal body
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Social partners' role in the
implementation, monitoring and assessment phase:
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Unknown
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Main level of involvement: Peak or cross-sectoral level
Involvement
German social partners are usually consulted by the Federal Government on broader measures, though no formal tripartite social dialogue structure exists in Germany at the federal level. Social partners were also consulted on COVID-19 measures. However time given for commenting on proposals was very short.
Views and reactions
German social partners are usually consulted by the Federal Government on broader measures, though no formal tripartite social dialogue structure exists in Germany at the federal level.
Sources
