The legislature has added a supplementary paragraph, 11a, to section 3 of the German Income Tax Act (EStG) with effect from 30.06.2020 which allows employees the opportunity to be paid a one-off subsidy free of income tax. This opportunity is only available until 31.12.2020 and the one-off payment amount may not exceed 1,500.00 EUR.
In order for the payment to be considered a tax free benefit as per section 3 (11a) EStG, it must be paid in addition to the salary otherwise owed. The employer’s confirmation, which can be given by way of a short, single-page allocation letter, should state that it is a payment to reduce the additional burdens of the Corona crisis to clarify the reason for the payment. The payment must be also credited to the employee’s payroll account. Furthermore, it must be taken into consideration that this Corona premium cannot be offset against top-up short-time allowances. With this amendment the legislature is complying with an initiative of the Federal Ministry of Finance which had announced such an income tax free payment in a bulletin dated 09.04.2020. The requirements for this additional payment had so far remained unclear; however, these have now been clarified by the statutory amendment.
