Bonus payments due to COVID-19-crisis will be tax and social security free in 2020 – up to € 3.000,-.
Bonus payments and allowance payments, that the employer is paying due to COVID-19-crisis will be tax free in 2020 – up to € 3.000,-. In order to this being applicable, however, this has to be an additional payment and the reasoning for this has to be COVID-19. Another prerequisite is, that this payment has not been granted earlier. This particular bonus payout has no impact on the yearly sixth (i.e. is not “rising” it) and is also not considered into the yearly sixth. In addition, this payment will be also social security free – the bonus, therefore, is paid out to the employee with no deductions.
ATTENTION: Other payments, then the here defined bonus and allowance payments, are to be considered in the normal “tax brackets”.
Summarizing, if employees are specially paid due to COVID-19-crisis, these payments should be considered in calendar year 2020 tax free – up to € 3.000,-. In order to avoid “taxation optimizations”, the parliamentary commentaries are especially raising the point, that these types of payments are one time – and have not been granted in the past. Also, they have to be clearly connected to the crisis. This is why, payments based on performance agreements (or similar), can not be paid out tax free.
It also needs to be considered, that mainly the employer is liable for the contribution payments and the consideration of correct contribution base. Therefore, in case of an audit, the employer will need to prove that the tax free payment has been made correctly – if he is unable to do so, there might be pay back of contribution payments and taxes. Since taxes, however, are the employee’s “debt” to the authorities, it might be difficult for the employer to get these payments back from the employee – especially, if the employee claims a “consumption in good trust” (“gutgläubiger Verbrauch”), or – based on his financial situation – is unable to make this payment, or has already left the company.
This is why, it is recommended to consider wisely, if the payment meets the requirements and, therefore, can be considered tax free.