COVID-19: Reducing red tape for lost-wage compensation

In the case of employee absences due to COVID-19, the Federal Ministry of Finance (BMF) clarified in a statement issued at the end of January that a “no-objection rule” applies. This simplifies payroll
tax
reporting for employers.

Background

If employees infected with COVID-19 but showing no symptoms are subject to a work ban ordered by the public health department or are required to quarantine, they normally receive compensation under Section 56(1) of the IfSG. The compensation also applies to employees who must care for relatives or children themselves due to the temporary closure of care facilities, for example, for children or people with disabilities. Compensation payments are made for a maximum of six weeks. The employee is responsible for making the compensation payment. The employee may then seek reimbursement for the payment made from the compensation authority. An application must be submitted for this purpose.

Issues with Reimbursement

A common problem for employers is that the application process is highly bureaucratic, and the reimbursements issued by the authority often differ from the amounts requested.

The resulting legal uncertainty for employers has now been mitigated by the Federal Ministry of Finance (BMF). It was previously unclear whether the discrepancy between the amounts claimed and those paid remains tax-free or whether income tax adjustments must be made.

Simplification by the BMF

The BMF now provides for a non-objection rule. Up to a discrepancy of 200 euros per day of absence from work, tax and social security exemptions now apply (within the meaning of Section 3 No. 25 of the Income Tax Act (EStG)). It is now no longer necessary to correct the payroll or file a report pursuant to § 41c(4) EStG, and the employer is exempt from liability under § 42d EStG. What remains in effect is the progression clause, to which amounts paid by the employer are subject. The BMF’s non-objection rule significantly simplifies practical application and is a step in the right direction toward reducing bureaucracy. It represents a significant relief for both the tax authorities and employers.

A Qualified Tax Advisor for Assistance

The crises of recent months and years have brought with them a wide range of new developments, compensation options, and changes to regulations. Our tax advisors in Düsseldorf and Oberhausen are available to advise you on many of these matters at our offices. Clients of Trimborn . Partner have access to a broad range of experts who will provide you with timely and comprehensive information on any new regulations. Let us advise you.