From children's bonuses to VAT - What Germany has planned to conquer the Corona crisis
June • 10th, 2020
by the Expat in the City Team
The German aid package for 2020 and 2021
With decreased exports, short-time work for employees, and the shutdown and reduced opening hours of stores and the gastronomy, the German government has come up with an economic multibillion aid package to limit the negative consequences of the Corona crisis effectively.
For the remainder of 2020 and 2021, the aid package (worth 130 billion) will cover financial support for families, municipalities and businesses as well as incentives for consumers.
Here’s a brief overview of the most important decisions and how they might benefit you:
1) Family bonus
The family bonus is a special measure for all families with kids living in Germany. This bonus primarily intends to boost purchasing power and thus the economy and is meant as a thank you to the parents for home-schooling their kids over the last months.
Every family that is entitled to child benefit will receive a one-time bonus of EUR 300 per child. The bonus is going to be paid directly with the regular child benefit and should be paid out in three instalments of 100 euros each.
Although the bonus must be taxed, it’s not counted towards basic security nor is it dependent on your income. Another measurement was taken for single parents, for whom the tax-free allowance increases from around 2000€ to 4000€ for the next two years.
The exact date for the payment has not been officially announced yet. However, it’s very likely that you can expect timely payment, since other Corona aids such as the lowering of the VAT rate will come into force in early July. Therefore it’s quite likely that the bonus will also be paid out in July or August.
2) Reduced VAT
From July 1st to December 31st 2020, the VAT rate will be reduced from 19 to 16 percent, the reduced VAT rate from 7 percent to 5 percent. The aim is to drop the rate temporarily in order to boost and strengthen overall domestic consumption despite the Corona crisis.
Luckily, the reduced VAT affects almost all areas of life, including food, eating in restaurants, flights within Germany, many leisure activities, and also buying a new car or bicycle! Which is why now would be the best time to plan a vacation within in Germany! Read our article about our favourite domestic summer destinations for some inspiration!
3) Subsidies for climate-friendly purchases
Also the environment is supposed to benefit from the new measurements. Chancellor Angela Merkel emphasized the focus and importance of "climate protection and innovation” within the economic stimulus package.
Therefore, it was decided to promote electric and climate-friendly cars, airplanes and ships in particular with doubled buyer’s premiums - aiming to increase the corresponding purchases significantly. This means, for example, that up to a net list price of an electric vehicle of up to 40,000 euros, federal funding increases from 3,000 to 6,000 euros. This measure is limited until December 31st, 2021.
Other important measurements of the German stimulus package you should know about:
- Social security contributions will be stabilised at a maximum of 40 percent by 2021
- Another multi-billion bridging aid program will be launched for medium-sized companies and freelancers
- Companies and citizens should be relieved of energy prices in the near future
- Hard-hit small and medium-sized companies will receive a tax relief and bridging help
- A programme to mitigate coronavirus effects in the cultural sector is planned for the summer
- Modernisation and digitisation of existing infrastructure with artificial intelligence and 5G mobile phone broadband will be promoted across Germany
More detailed information can be found here
Since we know with everything going on at the moment it can be difficult to maintain an overview, our aim is to always keep you posted about the most important developments and political decisions going on in Germany! Make sure to follow us on Facebook or to subscribe to our Newsletter to stay up to date!