Tax reductions for companies encountering liquidity problems because of coronavirus

Many companies have made very good profits in previous years, and advance tax payments have been set accordingly by the tax authorities. Due to coronavirus and the resultant drops in sales and profits, companies are encountering liquidity problems. The tax authorities have realized that and promised tax liquidity support for such companies. A communication of the Federal Ministry of Finance regarding this matter is currently being drawn up. The planned measures cover the following 3 points:

Deferments

If the taxes are already due and cannot be paid due to lack of liquidity, it will become easier to defer them. That principally requires that the payment would constitute a considerable hardship for the company. Thus, the circumstances resulting from the coronavirus crisis should briefly be outlined in the application for deferment.  The Bavarian Ministry of Economic Affairs, Regional Development and Energy has already announced that it will forego the imposition of interest until 31 December 2020. Other federal states are also considering doing so.

Adjustments of advance payments

Advance payments can be adjusted more easily. As soon as it becomes evident that a company's revenues will decrease compared to the previous year, the advance payments are supposed to be reduced uncomplicatedly by the tax authorities. This, in particular, concerns the following kinds of taxes: income tax, corporate tax. Up to now, the reductions do not apply to trade tax, as it is a municipal tax. It can, however, be assumed that corresponding adjustments are supposed to happen for the same reasons as for other the other kinds of profit taxes.

Enforcement and late payment fines

Should a company be unable to pay its taxes on time, late payment fines in the amount of 1 percent for each commenced month of the delay will become due. However, if the tax cannot be paid in good time because of liquidity shortages due to coronavirus, it is planned to forego imposing a late payment fine. Enforcement measures by the tax authorities (e.g. attachment) and the establishment of late payment fines are supposed to be suspended until 31 December 2020.

BEITEN BURKHARDT supports you in filing the necessary applications and has in this regard established an information centre for all legal questions in connection with the coronavirus crisis: Link.