Friday, December 3

Taxes on Corona aid: the big end is yet to come

by Michael Schreiber, Euro am Sonntag

SCorona has been throwing everyday life into disarray for more than a year and a half. Even in year 2 of the pandemic, a lot still takes getting used to – this also applies to the upcoming income tax return for the past year. It must be submitted to the tax office by November 1, 2021, unless you hire a tax advisor to handle the tiresome paperwork. Those who receive tax advice receive a seven-month delay until May 31, 2022.

Many self-employed people and tradespeople in retail, gastronomy and the cultural scene are still plagued by existential fears and currently have completely different worries than settling the accounts with the tax office for the Corona epidemic year 2020. But you can avoid filing your tax return not. Unlike employees, the self-employed are always obliged to submit a tax return. As a rule, this must be done in digital form via the portal. The tax authorities only accept a paper tax return in cases of absolute hardship.

New form for Corona aid

Anyone who has taken advantage of Corona emergency aid, bridging aid or comparable subsidies from the state in the past calendar year as a self-employed, trader or farmer must list these separately in a new form with the name “Annex Corona Aid” for the 2020 tax return.

The form is filled out quickly – the explosiveness of the few required information is nevertheless enormous. Because, according to figures from the Federal Ministry of Economics, the state has already transferred more than 121 billion euros (as of September 28, 2021) as immediate and bridging aid to smaller companies in need and solo self-employed people through various aid programs. The tax authorities want to get some of this back – either through claims for repayment or through back tax payments.

The Corona aid form is intended to enable a gigantic data comparison between the tax offices and the paying offices. They had to automatically report every payment of corona grants to the tax offices (letter from the Federal Ministry of Finance of January 21, 2021, Federal Tax Gazette 2021 Part I, p. 136, item 7).

Problem 1: The immediate Corona aid granted until the end of May 2020 was paid out unbureaucratically. The subsequent bridging and restart aids were also quickly granted. However, it is now checked in retrospect whether the subsidies were rightly granted according to the funding conditions. Because the help was only available to those who actually had financial worries anyway because of the corona pandemic and not completely independently of it.

Companies whose liquidity bottleneck was not as high as indicated in the funding applications are threatened in particular by claims for immediate aid. The Administrative Court of Düsseldorf ruled on December 14, 2020 (Az. 20 K 4706/20) that the recovery of the Corona emergency aid is lawful if a self-employed person already had economic problems before the pandemic.

Tip: If you want to find out whether there is a risk of repayment, you can find the relevant contact details and forms on the Landesinvestitionsbanken websites.

Problem 2: In the opinion of the tax authorities, the aid money disbursed represents taxable operating income and is therefore subject to income tax. Aid funds are only excluded from sales tax. An order of the Bavarian State Office for Taxes dated July 31, 2020 also expressly points this out for the other federal states (Az. S 2143.2.1-10 / 3 St 32).

Taxpayers who have received the corresponding aid funds in 2020 must therefore declare the amounts in their tax return in two places – once as operating income in the profit determination (balance sheet or attachment EÜR) and again as a total in the newly introduced attachment Corona aid.

Meanwhile, the Bavarian financial administration is noticeable with a special pace. She insists on tax liability for all aid, even if it was not only intended to cover fixed company costs, but also expressly for the private livelihood of artists and other self-employed people. Corresponding references to tax liability were included in the state’s own artist assistance program, for example (Item 2.2. Of the guidelines for the artist assistance program, Bayerisches Ministerialblatt 2020 No. 301). This is because the aid was only granted if operational liquidity bottlenecks, loss of income or a significant drop in sales were the prerequisites for an application. That is enough for the tax officials to justify a classification of the subsidies for the operating income.

Tax liability – for whatever

But the matter does not seem to be as clear as the Bavarian tax authorities see the tax liability of corona aid. Because there are tax experts, such as Hans-Peter Dellner, presiding judge at the Finance Court in Munich, who cannot understand the full tax liability of all state aid – especially when the aid granted to self-employed persons is expressly intended for livelihood. Against a tax liability of the aid funds, they argue that they are not based on an economic activity of the companies, but precisely on the state-ordered, compulsory non-activity as a result of the pandemic and the officially ordered lockdowns. The money does not come from the company’s usual customers, but from government agencies.

Tip: Corona aid must be declared in the tax forms, there is no getting around it. However, those affected can object to the tax assessment for 2020 and then wait for further developments. The finance courts may still deal with the matter.

There is another emergency exit for the self-employed if the Corona aid paid subsequently triggers taxes in the annual billing. You can apply to your tax office for tax exemption for reasons of equity if your own existence is still in danger. However, it is not yet clear whether the authorities will play their part in such applications. For them, too, the pandemic still takes getting used to.


Image sources: Christian Schwier /, Gunnar Pippel / Shutterstock

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