Tax Changes 2020

The German legislature has also introduced various tax changes for 2020. We have compiled what we consider to be the most important new rules:

1. The flat-rate additional meal expense allowances (Verpflegungsmehraufwendungen) were adjusted with effect from 1 January 2020 as follows (for travel within Germany): a. Absence of more than 8 hours: increased from 12 € to 14 € b. Absence of at least 24 hours: increased from 24 € to 28 € The rates in (a) also apply to a travel day (departure or return) on multi-day trips.

2. A change of tax class (Steuerklassenwechsel) has been possible more than once per year since 1 January 2020. Previously, only one change per year was permitted.

3. The newly introduced § 35c EStG makes it possible to deduct separately the costs of energy-efficient renovation measures on owner-occupied residential property. The following measures are in particular eligible: a. Thermal insulation of walls, roof surfaces and ceilings b. Replacement of windows, external doors and heating systems c. Installation of digital systems for energy management and consumption optimisation d. Optimisation of existing heating systems, provided they are more than two years old. A prerequisite is that the property is more than ten years old at the time the measures are carried out, and that a certificate from the executing company is available confirming that the requirements set out in § 35c EStG are met.

4. The legislature has also further tightened the rules on offsetting losses against capital income. Since 1 January 2020, so-called total losses - for example from the complete or partial irrecoverability of a capital claim, the write-off of worthless securities from a custody account, or a transfer to a third party - may only be offset against income from capital assets up to a maximum of 10,000 € in the year in which they arise. The existing rule continues to apply that losses from capital assets may only be offset against gains from capital assets. Excess losses are carried forward to subsequent years and offset there against corresponding income from capital assets. Furthermore, losses from forward transactions (Termingeschafte), e.g. options arising after 31 December 2020, may likewise only be offset against gains from forward transactions up to 10,000 € in the year of their arising. Losses in excess of this amount are carried forward to subsequent years and there offset exclusively against gains from forward transactions up to 10,000 € per year. § 20(6) EStG

5. A compulsory income tax assessment has been introduced where capital income such as interest is earned that is not subject to withholding tax (Kapitalertragsteuer). This applies, for example, to interest on private loans or on shareholder loans.

6. The statutory minimum wage was increased to 9.35 € with effect from 1 January 2020. Higher collectively agreed minimum wages take precedence.

Changes for the Self-Employed

1. The small business threshold for VAT purposes under § 19 UStG was raised from 17,500 € to 22,000 € with effect from 1 January 2020. If your turnover in 2019 was therefore below 22,000 €, you may continue to apply the small business scheme (Kleinunternehmerregelung) in 2020.

2. Further measures to promote electromobility have been implemented. Subject to certain conditions, it is possible to reduce the taxable private use element of electric vehicles to 0.25%.

3. Previously, it was possible to provide employees each month with up to 44 € of non-cash benefits free of tax and social security contributions, for example via vouchers. This rule has now been tightened. A distinction is currently drawn between closed-loop, controlled-loop and open-loop cards. Closed-loop and controlled-loop cards continue to benefit from the exemption. These include, for example, gift cards for a specific named retailer or so-called city cards. Open-loop cards, such as those issued by Amazon, may now in certain circumstances constitute taxable employment income. In addition, reimbursement of expenses - for example, retrospective reimbursement of a petrol receipt - is no longer possible on a tax-free basis. This too results in taxable employment income.

4. From 1 January 2020, it is possible to provide employees with so-called job tickets free of tax. In this case, the employee's employment-related deduction for commuting between home and principal place of work is reduced by the value of the job ticket. A flat-rate taxation option at 25% continues to be available, so that no reduction in the employment-related deduction applies.

5. The requirements for a VAT-exempt intra-Community supply (Innergemeinschaftliche Lieferung - i.g.L.) (i.e. a supply within the EU) have been further tightened. Under § 4 No. 1b) UStG, there is no VAT-exempt intra-Community supply where the supplying business fails to submit or submits late the so-called recapitulative statement (Zusammenfassende Meldung). In order for us to meet this obligation on your behalf, it is essential that we receive the accounting records in such cases by no later than the 15th of the month following the month in which an intra-Community supply took place.

6. The Research Allowances Act (Forschungszulagengesetz - FZulG) came into force on 1 January 2020. This makes it possible to apply for an allowance of up to 500,000 € in total. It is important to note that the research and development activities must have commenced after 1 January 2020.

7. Costs for company events were previously always to be allocated to employees via attendance lists and taxed individually. From 1 January 2020, it is possible under § 40(2) EStG to tax the costs at a flat rate of 25% without maintaining an attendance list. This results in a significantly reduced administrative burden.