Tax Relief Act of 2022
The Federal Council recently voted on the Tax Relief Act. It is intended to provide relief to the public following, among other things, a sharp rise in energy prices. The total amount is 16.3 billion euros. The changes are set to take effect in 2022. Your tax advisors in Düsseldorf and Oberhausen have summarized the measures taxpayers can expect.
The Energy Price Allowance
A one-time energy price allowance of €300 has been approved. This has been granted to all actively employed individuals who are subject to unlimited income tax liability. It is intended to offset the increased costs incurred when commuting to work. Employees are eligible if they receive their wages from an active employment relationship. This also includes short-term and marginal employees, as well as taxable workers who earn income from business profits. It should be noted that the energy price allowance is subject to income tax.
Payment of the Energy Price Allowance
The energy allowance is generally paid out through the employer. Payment is scheduled for September 2022. Employers are reimbursed via the payroll tax return. The energy allowance paid to employees is therefore deducted from the payroll tax due. In some cases, the energy price allowance may exceed the total payroll tax due. If this occurs, the tax office must reimburse employers for the difference from payroll tax revenues.
In some cases, the energy price allowance is not paid out through the employer. In these cases, the allowance is paid via the income tax return and assessment for the 2022 tax year. As part of the advance payment procedure for September 2022, taxpayers with business income will receive the energy price allowance in the amount of €300.
Taxability of the Energy Price Allowance
The EPP is taxable. Individual taxes then apply. In addition, church tax and the solidarity surcharge may also apply. For income-dependent social benefits, the energy price allowance is not to be considered as income. It should also be noted that recipients of pension benefits as well as retirees who do not earn any of the aforementioned types of income will not receive the EPP. Recipients of exclusively other types of income are also excluded from receiving the EPP.
Child Bonus 2022
The particular hardship that price increases pose for families is also to be mitigated. For each child eligible for child benefit, an additional one-time payment of €100 will be made. The payment will be made by the family benefits office in addition to the child benefit. The payment is scheduled to be made around the same time as the child benefit payment in July. If there is no entitlement to child benefit in July 2022, but there was entitlement in another month of 2022, the family will also be eligible. The bonus payment will be credited against the child allowance.
Higher commuting allowance
The government aims to offset the rise in fuel prices through this measure. The upcoming increase in the allowance for long-distance commuters will be brought forward to January 1, 2024. It applies starting at the 21st kilometer. The amount will be introduced retroactively as of January 1, 2022, and will be 38 cents. The increase introduced in this way, starting at the 21st kilometer, is to apply through 2026. Currently, the allowance is 30 cents for the first 20 kilometers and 35 cents from the 21st kilometer onward.
Once this regulation takes effect, an adjustment to the tax-free allowance can be requested in the following month through the payroll tax withholding process. It is important to note that the higher mileage allowance only takes effect to the extent that the increase exceeds €200. This is because the employee allowance is also being increased. Even in cases where taxpayers maintain two households, the increase in the commuting allowance will be prioritized. Here, too, it will apply starting in 2022.
Critical voices are coming from the Green Party. They see ecological flaws in the commuting allowance. It was also agreed to initiate a reform of the commuting allowance before the end of this legislative term. In their view, ecological and social concerns should be better taken into account.
Higher Employee Allowance
Employees who commute shorter distances will also benefit from the 2022 Tax Relief Act. The employee allowance is also being adjusted. Here, too, the law takes effect retroactively at the start of the year. The increase amounts to €200. This brings the total amount to €1,200.
Higher basic exemption
Here, too, the government is implementing the change retroactively as of January 1, 2022. The basic exemption for income tax will increase by €363, from €9,984 to €10,347. It is important to note that, as a result, the maximum amount for the deduction of alimony payments would also have to be raised to €10,347. It is possible that this step will be addressed in a separate legislative initiative.
Retroactive Change to Payroll Tax Withholding
The listed changes to the basic exemption and the employee flat-rate allowance have a direct impact on the amount of payroll tax, solidarity surcharge, and, where applicable, church tax. For this reason, the payroll tax withholding previously carried out in 2022 must generally be corrected by employers. However, this will only be done if the process is deemed economically reasonable for the company.
According to the legislative rationale, the method of recalculation is not strictly prescribed. There are various ways in which this can be carried out.
- Past pay periods can be recalculated
- the differences for the pay periods can be calculated
- through a refund as part of the income tax calculation for other income due in the near future
The retroactive change is also technically accompanied by the creation of revised program flowcharts for the 2022 payroll tax withholding. Following the passage of this amendment, the tax authorities are in the process of issuing and publishing the corresponding program flowcharts
Tax Advisors in Düsseldorf and Oberhausen
Trimborn.Partner is your tax advisor in Düsseldorf and Oberhausen. Please contact us for your tax and legal questions.
