This browser is not actively supported anymore. For the best passle experience, we strongly recommend you upgrade your browser.

Freshfields Risk & Compliance

| 3 minutes read

German government announces €130bn fiscal package to mitigate the economic consequences of COVID-19

The German government has introduced significant COVID-19 tax-related measures with the aim of assisting German individuals and companies that have been adversely impacted as a result of the COVID-19 pandemic. (For further details, see our briefing.) 

On 3 June 2020, the German government took a further step and announced a €130bn fiscal package to help economic recovery. The package includes 57 measures that can be split into various categories as follows:

  • by anticipated time of impact: The measures are classified either as part of the 'economic stimulus and crisis management package' (Konjunktur- und Krisenbewältigungspaket), which is intended to have a short-term impact, or the 'future package' (Zukunftspaket), which is intended to have a medium- and long-term impact;
  • by specific sectors such as consumer consumption, support for corporates, green and digital investments and general public investments; and
  • by target region: While most of the measures concern Germany, reference is also made to Germany's contribution to the EU support and investment programmes and to the expansion of humanitarian aid, particularly in Africa.

The following summary focuses on outlining the particular measures affecting companies operating in Germany from a German tax law perspective which – apart from a measure regarding research allowance – all fall under the 'economic stimulus and crisis management package' and so are intended to have a short-term impact.

Income tax (corporate income tax, income tax and trade tax)

  • Check the box: introducing an option for partnerships to become subject to corporate income tax (described as a 'check the box' election in reference to a longstanding US tax equivalent) - this would be an exceptional development for the German tax code.
  • Extension of tax loss carry-back relief: tax loss carry-back relief will be extended for the years 2020 and 2021 up to a maximum of €5m per company. A mechanism will be introduced to make this reimbursement directly and retroactively available for the 2019 tax return through the creation of a 'corona tax reserve', but it should be noted it is proposed that this reserve will have to be released by the end of 2022 at the latest.
  • Higher depreciation rate: as a tax investment incentive, the depreciation rate for fixed moveable assets (bewegliches Anlagevermögen) will be increased to be two and half times higher than the current applicable depreciation rate, up to a maximum of 25 per cent per annum for the fiscal years 2020 and 2021.
  • Increase of trade tax credit for partnerships and individuals: the trade tax credit for individuals (made within the framework of their personal income tax assessment) for trade tax, paid either by themselves for their businesses or by a partnership in which they hold an interest, will increase from a factor of 3.8 to 4.0 of the trade tax base.
  • Increase of tax research allowance basis: the tax research allowance (Forschungszulage) can be credited against personal or corporate income tax. The assessment basis of the research allowance will increase from €2m to €4m per company with retrospective effect from 1 January 2020 for a limited period until 31 December 2025. This provides an incentive for companies to invest in research and development and thus in the sustainability of their products despite the COVID-19 crisis.


  • VAT rate reduction: in order to strengthen domestic demand in Germany, the standard VAT rate will be reduced from 19 per cent to 16 per cent and the reduced rate from 7 per cent to 5 per cent, but, in each case, only for a limited period from 1 June 2020 to 31 December 2020.
  • Postponement of due date of import turnover tax: the due date of import turnover tax (Einfuhrumsatzsteuer) will be postponed to the 26th day (from the 10th day) of the following month in order to help provide companies with cash liquidity.

Social security contributions

The government has announced a 'Social Guarantee for 2021' to stabilise (the sum of employer plus employee) contributions into the social security systems at 40 per cent. This is aimed at both protecting net incomes of employees and improving competitiveness of companies.

It should be noted that the measures described above have only been announced by the German government and the necessary legislative measures have yet to be adopted. 

However, it is expected that a number of these measures will be introduced into the legislative process shortly in order to be passed prior to the summer break of the German parliament.


europe, tax