Tax Relief Act 2022

The Tax Relief Act 2022 implements most of the tax relief measures adopted by the government in February in two relief packages.

Just in time for the parliamentary summer recess, the Bundestag and Bundesrat gave the green light for the Tax Relief Act 2022, which was originally only intended to implement the tax measures from the first relief package of the federal government. The start of the war in Ukraine then made a second package necessary in February. The income tax relief and child bonus contained in this package have also been incorporated into the law.

With the exception of the child bonus, all of the changes made by the Tax Relief Act 2022 also have an effect in one form or another on the payroll tax deduction for employees. More on this following the following summary of the relief measures contained in the Act:

• Basic allowance: At the beginning of the year, an increase in the basic tax allowance by 240 euros to 9,984 euros, which had already been decided two years ago, came into force. This increase was topped up by a further 363 euros with retroactive effect from January 1, 2022. The basic tax-free amount for 2022 is therefore now 10,347 euros. While previous increases in the basic tax-free amount also raised the maximum amount for deducting maintenance payments by the same amount, this was not done for the additional increase, at least not in the Tax Relief Act 2022. The maximum amount for 2022 will therefore remain at EUR 9,984 for the time being, but may still be adjusted in a future amending law.

  

• Employee Lump Sum: Also retroactively to the beginning of the year, the employee lump sum will be increased by 200 euros to 1,200 euros. The main financial beneficiaries are employees with short commutes, because in the case of full-time employment, the commuting allowance alone fully consumes the employee allowance from a distance of around 15 km (old) or 18 km (new).

• Long-distance commuter allowance: In view of the increased prices for mobility, the increase in the flat rate for long-distance commuters from the 21st kilometer and the mobility premium, which is actually not due until January 1, 2024, will be brought forward to this year. The commuting allowance will thus be 38 cents instead of 35 cents from the 21st kilometer, retroactive to the beginning of the year. This increase will apply up to and including 2026, but discussions are already underway about raising the distance allowance from the 1st kilometer as early as next year. In addition, the coalition committee has stated that the government is aiming to reorganize the commuter allowance from an environmental and social perspective before the end of this legislative period.

• Energy Price Flat Rate: Employees in their first employment relationship receive a one-off allowance of 300 euros gross on top of their salary. However, the allowance is taxable, so the exact amount paid out depends on the individual tax rate. Self-employed persons, freelancers and farmers and foresters receive the subsidy via a one-off reduction in their advance income tax payment.

• Child bonus: In addition to child benefit, families will receive a one-time bonus of 100 euros for each child. To this end, child benefit will be increased accordingly in July 2022 and paid out via the family benefits offices. Children will be taken into account for the bonus if they are entitled to child benefit in at least one month of 2022. However, payment may be made later if there is no child benefit entitlement in July 2022. The 2022 child bonus is not to be taken into account as income for social benefits, but it is counted towards the child allowance.

Almost all of the changes in the Tax Relief Act 2022 also have consequences for payroll tax. This primarily affects employers, who must take the changes into account in payroll accounting and payroll tax deduction. As far as the higher basic tax-free allowance and the higher employee lump-sum allowance are concerned, the law stipulates that the employer must correct the payroll tax deduction previously made in 2022 if it is economically reasonable for him to do so.

How the correction is made is not specified. It is possible to recalculate or calculate the difference for the past wage payment periods in this year, as well as a refund as part of the payroll accounting and wage tax calculation for a future payroll period. In March, the Federal Ministry of Finance published amended program schedules for payroll tax deduction, which will be applied in payroll accounting programs as of June 1.

Further expense is incurred by employers with the payment of the energy price flat rate (EPP, see also further contributions on the EPP). When and whether this is the case depends on whether the payroll tax is paid monthly, quarterly or annually:

• Monthly payer: The EPP must be reported on the August payroll tax return due on September 12, 2022, and paid to employees in September.

• Quarterly payers: In the case of quarterly payers, the EPP will be offset against the payroll tax return for the III quarter due on October 10, 2022. The employer may decide whether to make advance payments and pay the lump sum already in September or to pay it only after settlement with the tax office in October.

• Annual payer: Employers who pay payroll tax only once a year are not obliged to pay out the EPP. If the employer waives the payment, the employees will receive the lump sum from the tax office after filing a tax return for 2022. If the employer pays the lump sum anyway, the offset is provided for in the annual tax return, which is due on January 10, 2023.

The Federal Ministry of Finance has already published an amended form for the 2022 payroll tax return, in which a new field with the code 35 for the EPP has been included. This field may only be completed in the filing periods August 2022, 3rd quarter 2022 and in the annual filing 2022. Therefore, if the EPP is changed at a later date, the corresponding filing must be corrected. In addition, the value of the EPP paid out and to be deducted should always be indicated in the field without a minus sign.

The EPP also has an impact on the electronic wage tax certificate for 2022. In this certificate, the capital letter E must be entered for all employees to whom the employer has paid the EPP, so that the tax office can correctly determine the EPP in the tax assessment.

It is easier for employees than for employers, who only have to take action if they have an income tax allowance for the long-distance commuting allowance and a commute of more than 20 kilometers. An adjustment of the allowance can be applied for at the tax office with immediate effect, but only has an effect to the extent that the higher long-distance commuter allowance exceeds the employee allowance, which has also been increased.