VAT treatment of coronavirus emergency aid

Corona emergency aid is completely excluded from VAT and is therefore not to be declared as tax-exempt or non-taxable turnover.

The Bavarian State Tax Office points out that coronavirus emergency aid for companies must be recorded as business income for income or corporation tax purposes. From a VAT perspective, however, these are genuine non-taxable subsidies that do not have to be reported as tax-exempt or non-taxable transactions in either the advance VAT returns or the annual VAT returns. Incorrect entries in the declaration forms lead to unnecessary queries from the tax office and thus to delays in the processing of advance VAT returns and the reimbursement of declared input tax credits. In contrast, the tax treatment of other financial support offers from the federal and state governments (loan programs, guarantee programs, etc.) must be examined on a case-by-case basis, as these are sometimes assessed differently for tax purposes.