Overview of the energy price flat rate (EPP)

All employed persons will receive a one-time energy price allowance of 300 euros for 2022, which will be paid out via payroll or income tax.

As part of the Tax Relief Act 2022, all employed persons will receive a one-off energy price allowance (EPP) of 300 euros from the state. However, the amount is taxable, so the full amount is ultimately only available to taxpayers whose income does not exceed the basic allowance or who are exclusively mini-jobbers.

High earners, who have to pay solidarity surcharge and church tax in addition to income tax, receive only about half of the amount after deduction of taxes. After all, no social security contributions are due even if the employer pays it out, because it is not remuneration for work. In addition, the EPP is not to be taken into account as income in the case of social benefits that depend on the amount of income.

Under the law, entitlement to the EPP arises on September 1, 2022. The largest group of eligible taxpayers will then receive timely relief via a payout by their employer or a reduction in their advance income tax payments, without having to do anything themselves. All other eligible taxpayers, for example employees for whom there is no employment relationship on September 1, 2022, will receive the EPP from the tax office as part of their income tax assessment for 2022 when they file an income tax return for 2022 in the coming year.

To implement the EPP, 11 new paragraphs have been added to the Income Tax Act at once, which regulate who receives the lump sum, how the lump sum is to be paid to those entitled to it, and how abuse is to be prevented. In further articles you can read what the regulations mean for employers, for their employees as well as for self-employed persons and entrepreneurs.

Who is eligible?

All persons who reside or habitually reside in Germany at least temporarily during the year 2022 and are thus subject to unlimited income tax liability and who receive income in that year from at least one of the following types of income are entitled to the EPP:

• Income as an employee from active employment

• Income from a business

• Agricultural/forestry business

• Freelance or other self-employed work

To be eligible for EPP, the qualifying activity need not be performed at a specific time, for a minimum duration, or with a minimum earnings. Eligible employees include:

• Workers, employees, trainees, civil servants, judges, soldiers

• Managing directors/board members with income from employment

• short-term and marginal employees ("mini-jobbers") as well as temporary workers in agriculture and forestry, regardless of the type of payroll tax deduction (flat-rate payroll tax or individual payroll tax)

• Employees in the passive phase of partial retirement

• Persons who save a value credit with the DRV Bund

• Volunteers (Bufdi, FSJ, FÖJ, IJFD)

• cross-border commuters and cross-border commuters with unlimited tax liability in Germany

• Persons who receive exclusively tax-exempt wages (e.g. volunteer exercise instructors/supervisors).

• Working students and students in a remunerated internship

• People with disabilities who work in a workshop for the disabled

• Employees with an active employment relationship who receive wage replacement benefits subject to the progression proviso (sick pay, maternity pay, parental allowance, short-time worker, seasonal short-time worker, transfer short-time worker allowance, insolvency pay, compensation for loss of earnings in accordance with the Infection Protection Act, etc.).

• Employees who receive tax-exempt or taxable allowances from the employer (e.g., maternity pay)

Who is not entitled to the EPP?

Because, according to the explanatory memorandum to the law, the EPP is primarily intended to compensate for the enormous short-term increase in commuting costs for those in gainful employment, persons who are not in gainful employment for the entire year 2022 are not entitled to the EPP. This includes individuals who earn only excess income or are recipients of pension benefits or annuities. These are in particular:

• Pure landlords with income from letting and leasing

• Recipients of investment income (e.g. shareholders of a GmbH who only receive profit distributions but do not act as managing directors)

• Pensioners or civil servants pensioners

• Other recipients of exclusively other income (e.g. members of state parliaments, federal parliaments or the EU)

• Students without gainful employment

• Recipients of unemployment benefit I (there is no employment relationship)

• Recipients of other social benefits (e.g. unemployment benefit II/Hartz IV)

• Cross-border commuters who work here but do not have a domicile or habitual residence in Germany and are therefore only subject to limited tax liability

It is important to note that income from this list is not an exclusion criterion, but only that the eligibility requirement is not met for this income alone. Even minimal gainful activity as an entrepreneur or employee at any time in 2022 establishes entitlement to the EPP.

What applies to cross-border commuters?

Persons who live in Germany and are employed by an employer abroad (cross-border commuters and cross-border commuters) also receive the EPP. In these cases, however, the EPP is not paid out via the employer, but only after the competent tax office has submitted a tax return for the year 2022. Entitlement to the EPP exists regardless of whether Germany also has the right of taxation on the qualifying income. Employees without domicile or habitual residence in Germany, in particular employees with limited income tax liability who only work in Germany, on the other hand, are not eligible. This also applies if they are treated as having unlimited tax liability upon application.