Increase in VAT rates as of 01.01.2021
For services rendered after 31.12.2020, 19% or 7% must be charged again. Entrepreneurs should also take this into account for their incoming invoices in the context of input tax deduction.
As with the changeover from 01.07.2020, the decisive factor is when the corresponding service is deemed to have been performed. In the case of goods deliveries that are dispatched or transported, the turnover is deemed to have been carried out at the start of the dispatch or transport. Services (other services, e.g. advisory services) are generally deemed to have been performed at the time of their completion.
For partial services, down payments and advance payments, special VAT rules apply, which we must clarify in each individual case.
Higher trade tax credit
The trade tax paid on a business enterprise can be credited at least in part against the entrepreneur's income tax. The reduction factor was previously 3.8 times the trade tax assessment amount. As of the assessment period 2020, the credit factor is 4.0. Thus, in individual cases, personal entrepreneurs can be completely relieved of trade tax up to an assessment rate of 400%.
Temporary introduction of the declining balance deduction for wear and tear
For movable fixed assets acquired or manufactured in 2020 and 2021, the Second Corona Tax Assistance Act reintroduced the possibility of a declining balance depreciation for wear and tear (AfA). Thus, higher depreciation is possible, resulting in lower taxable income.
Due to recent case law on the retroactive adjustment of invoices in order to actually claim input tax, the following is important for the preparation of invoices (outgoing invoices).
The description of services in the invoice must be sufficiently concrete and customary. This means that the information must be as specific as possible. If applicable, the brand, model, colour of an item, hours, indication in units must be stated.
Great Britain will be a third country for tax purposes as of 01.01.2021
On 31.01.2020, the United Kingdom of Great Britain and Northern Ireland left the European Union. According to the provisions of the Withdrawal Agreement, a transitional period followed during which, among other things, the VAT law (turnover tax) of the Union continues to apply/was applicable in the United Kingdom of Great Britain and Northern Ireland. This transitional period will end at the end of 31.12.2020.
Great Britain and Northern Ireland are to be regarded as a third country for VAT purposes after 31.12.2020.
Deduction of income-related expenses in the home office
In the wake of the Corona crisis, home office work by employees has inevitably increased.
For the recognition of a home office, the previous criteria continue to apply.
The legislator has now passed a simplification regulation for cases that do not meet the strict criteria (e.g. at the kitchen/living room table, work corner). Here, the taxpayer can deduct a flat-rate amount of €5 for each calendar day on which he/she carries out all his/her business and professional activities exclusively in the home (max. 120 days). It is limited to a maximum amount of €600 per year and will be granted in 2020 and 2021. The home office allowance is included in the income-related expenses allowance (€ 1,000).
Increase of the distance allowance
From 2021, the distance allowance will increase from €0.30/km of one-way travel to €0.35/km from the 21st kilometre. From 2024 to 2026, the flat rate for long-distance commuters will be increased by a further 3 cents (thus € 0.38) from the 21st kilometre of distance. After that, the original deduction of € 0.30 is to be possible again according to the current legal situation. This regulation applies to employees, entrepreneurs and also to family journeys home within the scope of double household management.
Child benefit and child allowance
From January 2021, child benefit will increase by €15 per month per child to €219 for the first and second child, €225 for the third child and €250 for the fourth and each additional child.
The annual child allowance will increase by 288 € to 5,460 €. Likewise, the allowance for care, education and training needs will increase by 288 € to 2,928 €.
The annual personal exemption will increase to €9,744 in 2021 and to €9,984 in 2022.
Higher disability lump sums
The current disability lump sums will be doubled and the system adjusted.
In future, a degree of disability is to be determined from 20% (up to 25%). In addition, a disability-related lump sum for travel expenses is to be introduced. Furthermore, the care lump sum will be adjusted.
Increase of the relief amount for single parents
The relief amount for single parents will be increased annually from € 1,908 to € 4,008 for the years 2020 and 2021. From the second child onwards, the amount will be increased by € 250 (as before).
Deadlines for the submission/submission of tax returns
Due to tax representation by a tax advisor, the deadline for tax returns for 2019 ends on 28.02.2021. At the level of the tax administration, it was decided in December 2020 to extend the deadline by one month. The German Association of Tax Consultants and the Federal Chamber of Tax Consultants had demanded an extension until the end of May 2021, due to the workload in the tax consultant offices(application for state aid, corona-related additional workload). The coalition partners reportedly agreed on 17.12.2020 to an extension until 31.08.2021.
These points are only a selection of the innovations in tax law and do not claim to be complete. Among other things, a large number of changes will occur as a result of the annual tax law, partly also due to the Corona pandemic. All regulations cannot be presented here. Therefore, the personal situation can only be clarified through tax advice or in the context of the preparation of tax returns.
Further details on the individual points, we can gladly explain to you in a personal consultation.
This information does not replace tax advice - it is a general statement. Each case must be examined separately.