CoVid 19: New Federal instruction on the adjustment of tax payments

On 19 March 2020, the Federal Ministry of Finance, in preparation for the envisaged oncoming liquidity crisis and in joint coordination with the supreme tax authorities of the federal states, published a new instruction regarding the calculation and treatment of tax payments and prepayments. Accordingly, on March 19, 2020, the supreme tax authorities of the federal states issued identical decrees containing measures relating to the determination of trade tax base amounts for the purpose of advance payments.

As in general businesses are obliged to make tax advance payments on their personal (in case of individual businesses or partnerships) and/or corporate income taxes, trade taxes as well as on their VAT obligations which are in principle calculated on their last year declarations, given the current crisis such prepayments might prove unduly burdenful for the current fiscal year. Prepayments may be adjusted for an ongoing fiscal year if there are reasons to assume that the expected profits shall not meet the former year income and turnover criterias. However, normally the adjustment procedure requires a formal application supported with hard data (eg. preliminary quarterly results)

1. ADJUSTMENT OF ADVANCE TAX PAYMENTS

Already stipulated tax prepayments (trade tax, corporate income tax and income tax as well as sales tax) should be reviewed. The tax authorities are instructed to make uncomplicated and quick adjustments upon request.

2. DEFERRAL OF TAX PAYMENTS

Tax payments due should, upon request and to the extent that tax payments cannot be made due to the effects of the COVID 19 pandemic, be deferred in principle without interest until 31 December 2020. Although it must be shown that the company or taxpayer is directly affected, it is not necessary to provide detailed evidence of the value of the damage incurred. The possibility of deferral does not apply in the case of withholding taxes, in particular wage tax and capital gains tax. In such cases, a deferral of enforcement could be considered in individual cases.

3. SUSPENSION OF ENFORCEMENT MEASURES

The tax authorities have been instructed to waive the enforcement of overdue tax debts (corporate income tax and income tax) until 31 December 2020. Legally applicable late payment surcharges are to be waived. In the case of trade tax liabilities, the respective municipality must be consulted, as the measures taken by the federal and state governments have no effect on trade tax.