Fourth Corona Tax Relief Act in the Works.

The Fourth Corona Tax Relief Act primarily extends deadlines and existing Corona tax relief.

With some pomp, the German Federal Ministry of Finance has published the draft bill for the "Fourth Law on the Implementation of Tax Relief Measures to Deal with the Corona Crisis". Almost all of the measures contained in the law had already been planned for some time or announced in the coalition agreement. The measures are encouraging in any case, because in addition to the extension of various deadlines and special regulations, an extended tax exemption for a Corona bonus to caregivers will also be introduced. Here are the planned measures in detail:

• Degressive depreciation: As part of the Corona stimulus package, movable fixed assets acquired or manufactured in 2020 and 2021 were also eligible for declining balance depreciation of up to 25 %, up to a maximum of two and a half times straight-line depreciation. This declining balance depreciation option is now also extended by one year and thus also applies to assets acquired or manufactured in 2022. If an asset also qualifies for special depreciation under the investment deduction, this can be claimed in addition to declining-balance depreciation.

  

• Investment deduction: Investment deduction amounts must be reversed if they are not used for favored investments by the end of the third fiscal year following the year in which they were claimed. As a result of the Corona pandemic, the deadline for amounts deducted in 2017 and 2018 was extended by one and two years to four and five years, respectively. As a result, beneficiary investments can still be made in 2022 to date. However, due to the ongoing corona effects and the associated supply difficulties, in many cases investments will not be possible in 2022 either. In order to avoid negative effects and to preserve the liquidity of companies, the deadline for investment deductions whose investment periods expire in 2022 will be extended by a further year to four, five or six years. This will give taxpayers who want to invest in 2022, but may not be able to do so due to the Corona crisis, the opportunity to catch up on the investments in 2023 without negative tax consequences (reversal, interest on the additional tax claim).

• Reinvestment Reserve: As with the investment deduction, the deadlines for reinvestments under a reinvestment reserve are also extended by a further year. If a reserve still exists at the end of the fiscal year ending after February 28, 2020 and before January 1, 2023 and would have to be released during this period, the reinvestment period will not end until the end of the fiscal year ending after December 31, 2022 and before January 1, 2024.

• Home Office Flat Rate: A lump sum of 5 euros per day can be claimed for work at home. The lump sum is only granted for days on which the work is performed exclusively at home. Unlike the deduction of income-related expenses for the home office, there are no further eligibility requirements for this lump sum. The flat rate is limited to a maximum amount of 600 euros per year and was previously only valid for the years 2020 and 2021. However, in its coalition agreement, the ruling coalition had announced an extension of the home office flat rate by one year, i.e. until December 31, 2022, which is now being implemented.

• Short-time allowance: The Corona Tax Relief Act introduced a temporary tax exemption for employer subsidies for short-time allowances and seasonal short-time allowances. This tax benefit for subsidies for short-time allowances will be extended by three months until the end of March 2022.

• Care bonus: Nurses are to receive a federally funded bonus in recognition of their special workload during the Corona pandemic. The payment is to be made by the employer, and the costs are to be reimbursed by the federal government. In addition to the federal government, the states also plan to make their own premium payments in some cases. To further enhance the financial impact of the bonus, it will be tax-free up to an amount of 3,000 euros. Voluntary benefits paid by the employer that are not granted on the basis of federal or state regulations are not eligible. The payment period from November 18, 2021 to December 31, 2022 is eligible.

  

• Loss carryback: The extended loss offset already introduced in 2020 will be extended until the end of 2023. To this end, the maximum amount for loss carryback will also be increased to EUR 10 million for 2022 and 2023 (EUR 20 million in the case of joint tax assessment). In addition, the loss carryback will be permanently extended to two years and will be carried forward to the immediately preceding two years, but from 2024 only within the old maximum amount of EUR 1 million (EUR 2 million in the case of joint assessment).

  The extension of the loss carryback to two years follows the previous system, in which losses are first carried back to the previous year. If it is not possible, or only partially possible, to offset the losses in this assessment period, the remaining loss amount is carried back to the second assessment period preceding the year in which the loss was incurred. However, in order to simplify tax law, the previously existing right to choose the scope of the loss carryback will be restricted at the same time. This means that the application of the loss carryback can no longer be partially waived as of the year in which the loss is incurred, 2022. The taxpayer can now only opt against the application of the loss carryback in favor of the loss carryforward as a whole.

• Tax return deadlines: The deadline for filing tax returns for 2020 will be extended by a further three months in cases where the tax advisor prepares the tax return, and will thus run until the end of August 2022. The deadlines for filing returns for 2021 and 2022 will also be extended, but to a lesser extent. In addition, the length of the general deadline extension here depends on whether the tax return is prepared by the tax advisor or filed by the tax advisor himself. Without a tax advisor, the tax return for 2021 must be filed by September 30, 2022, and the tax return for 2022 must be filed by August 31, 2023. For returns prepared by the tax advisor, deadline extensions of four months for 2021 and two months for 2022 apply.