On 18 December 2020, the Bundestag also approved the Annual Tax Act 2020 (Jahressteuergesetz 2020). This brings numerous changes, the most important of which we would like to briefly present:
Home Office Flat Rate
Since the outbreak of the coronavirus pandemic, many employees have been working from home; some have set up their workstation in the living room, dressing room, or even at the kitchen table. Despite the associated costs, under previous case law a deduction of home office expenses as income-related expenses was only possible under certain conditions, which are unlikely to be met by a large number of taxpayers.
The legislator therefore decided on relief measures to enable a deduction of income-related expenses for working from home: for each calendar day in 2020 and 2021 on which they work exclusively from home, taxpayers can claim EUR 5 as income-related expenses — up to a maximum of EUR 600 per year. This applies even when the usual conditions for deducting the costs of a home office are not met.
Strengthening of Voluntary Work
The so-called instructor allowance (Übungsleiterpauschale) will increase from 2021 from EUR 2,400 to EUR 3,000; the volunteer allowance (Ehrenamtspauschale) will also rise from EUR 720 to EUR 840.
Simplified Proof of Donations
In addition, a simplified proof of donations is now possible for amounts up to EUR 300. A copy of the bank statement is sufficient; a donation receipt is not required in these cases. Previously, the simplified proof of donations was only possible up to a donation amount of EUR 200.
Tax Exemption of Subsidies for Short-Time Work Allowance in 2021
Employer subsidies for short-time work allowance (Kurzarbeitergeld) remain tax-free until the end of 2021. The provision introduced by the Corona Tax Assistance Act of 16 June 2020 was originally limited in time and has now been extended by one year. The rule therefore now applies to wage payment periods beginning after 29 February 2020 and ending before 1 January 2022.
Extension of the Payment Deadline for Tax Exemptions of Corona Special Payments
There are also improvements for allowances and support payments made to employees as a result of the coronavirus crisis, such as the so-called nursing bonus. The tax exemption for payments of up to EUR 1,500, originally limited to the end of the year, has now been extended to 30 June 2021. This gives employers more time for a tax-privileged settlement of coronavirus relief payments and avoids any need for pre-financing.
Note: this is purely an extension of the deadline; it does not mean that an additional EUR 1,500 can be paid out tax-free by 30 June 2021.
Relief for Single Parents
The time limit on the increased relief amount for single parents is being abolished. From the 2022 assessment period, a relief amount of EUR 4,008 will apply. Under the Second Corona Tax Assistance Act, the increase had originally been introduced on a limited basis for 2020 and 2021.
Higher Benefit-in-Kind Threshold
The exemption limit for benefits in kind for all employees will be raised from 2022 from the previous EUR 44 to EUR 50.
Extension of the Tax Treatment of Expenses for Reduced-Rent Residential Letting
Specifically, the provision allows landlords to deduct their income-related expenses in full, under certain conditions, even where rent is set very low or so-called "reduced".
Previously, landlords could only claim income-related expenses in such cases if the rent received was at least 66% of the local comparative rent. Through the Annual Tax Act 2020, this threshold is now being lowered to 50%. The rule applies from 1 January 2021. This is intended to prevent landlords from raising rents for purely tax-related reasons.
Redesign of the Investment Deduction Allowance
Under the previous rule, small and medium-sized businesses could deduct from profit an investment deduction allowance of up to 40% of the anticipated acquisition or production costs for a planned acquisition or production of an asset. The investment deduction allowance thus reduces profit and accordingly lowers the tax burden in the year of deduction.
The Annual Tax Act 2020 now raises the deductible investment deduction allowance from the previous 40% to 50% of the anticipated acquisition costs.
In addition, there are relief measures regarding the eligibility requirements for forming investment deduction allowances and for using special depreciation. A uniform profit threshold of EUR 200,000 now applies to all types of income as a requirement for using investment deduction allowances.
The new legal provision applies for the first time to investment deduction allowances and special depreciation claimed in financial years ending after 31 December 2019.
Frequently asked questions
Frequently asked questions
How much is the home office flat rate for 2020 and 2021?
For the years 2020 and 2021, taxpayers can claim a flat rate of EUR 5 per calendar day as income-related expenses for each day worked exclusively from home. The annual maximum is EUR 600, equivalent to 120 home office days. This flat rate also applies when the strict requirements for a dedicated home office room are not met.
What are the trainer's allowance and volunteer allowance from 2021 onwards?
From 2021, the trainer's allowance (Übungsleiterpauschale) increases from EUR 2,400 to EUR 3,000 per year. At the same time, the volunteer allowance (Ehrenamtspauschale) is raised from EUR 720 to EUR 840. This provides stronger tax incentives for voluntary work.
Up to what amount is the simplified donation receipt permitted?
Following the Annual Tax Act 2020 (Jahressteuergesetz 2020), the simplified donation receipt is permitted up to an amount of EUR 300 (previously EUR 200). In such cases, a copy of the bank statement is sufficient as proof for the tax office; a separate donation receipt is not required.
From when is reduced-rate letting with full deduction of income-related expenses possible?
Since 1 January 2021, landlords can fully deduct their income-related expenses for reduced-rate residential letting if the rent received amounts to at least 50% of the local market rent. Previously, this threshold was 66%. The change is intended to prevent landlords from having to raise rents purely for tax reasons.
How do the investment deduction allowances change under the 2020 Annual Tax Act?
The investment deduction allowance (Investitionsabzugsbetrag) is increased from 40% to 50% of the expected acquisition or production costs. In addition, a uniform profit threshold of EUR 200,000 now applies as a prerequisite across all categories of income. The new rules apply for the first time to investment deduction allowances and special depreciation in fiscal years ending after 31 December 2019.
How long are Corona special payments of up to EUR 1,500 tax-free?
The tax exemption for Corona allowances and support payments of up to EUR 1,500 has been extended until 30 June 2021. However, this is merely an extension of the deadline – the maximum amount of EUR 1,500 cannot be paid out tax-free a second time; employers simply have more time to process the tax-privileged payment.