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Measures in the 2022 German Tax Relief Act

In view of high energy costs, on 16.3.2022, the German Federal Cabinet approved a draft of the 2022 Tax Relief Act and, on 20.5.2022, the Bundesrat [upper house of the German parliament] likewise gave its approval.

Relief packages already previously drafted

On 23.2.2022 as well as 24.3.2022, in view of high energy costs, the governing coalition had already agreed to provide relief to consumers. In doing so they came to a specific agreement on various support measures as part of a relief package (cf. earlier issue). Standing at the heart of this relief package is the elimination of the renewable energy levy already by 1.7.2022 (cf. previous issue). 

2022 Tax Relief Act

Three income-tax-related measures, in particular, will enter into force through the 2022 Tax Relief Act: 

(1) For 2022, the employee allowance for work-related expenses for income tax purposes will be increased by €200 to €1,200.

(2) Basic personal tax allowance – This will go up retroactively, from 1.1.2022, by €363 from currently €9,984 to €10,347. 

(3) Long-distance commuter tax allowance – In view of higher mobility costs, the increase in the long-distance commuter tax allowance that was previously due to come into force on 1.1.2024 (from the 21st kilometre) as well as the mobility bonus uplift will be brought forward. The long-distance commuter tax allowance will now be raised to €0.38 retroactively from 1.1.2022.

At the same time, the government also finalised the following provisions in the relief package that had already been announced (cf. earlier issue).

(4) One-off child bonus – In July, a one-off bonus in the amount of €100 per child will automatically be paid out together with the child benefit. The child bonus will be offset against the child tax allowance. 

(5) One-off taxable energy cost lump sum payments – Under Sections 112 to 122 of the German Income Tax Act, as amended, all employees whose income is subject to tax will be paid a taxable energy cost lump sum in the amount of €300 for 2022. For those who are eligible, the entitlement to this will arise as of 1.9.2022. The lump sum amount should be paid to employees by their employers in September 2022. Employers should take the energy lump sum payments from the overall amount of payroll tax that has to be withheld or, if necessary, any excess amounts should be refunded to employers by the local tax office. For everyone else who is eligible, the energy cost lump sum amount will be determined along with the income tax assessment for the 2022 assessment period and offset against the income tax that has been determined. 

(6) One-off reduction for advance payments of income tax – An advance payment via a one-off reduction of advance payments of income tax has also been provided for.

(7) Nine-euro ticket – As of 1.6.2022, in June, July and August, it will be possible to buy public transport tickets valid throughout Germany for €9 each month.

(8) Fuel price cuts – At filling stations, the energy tax included in the fuel prices will be cut by €0.30 per litre for petrol and by €0.14 for diesel for a limited period of three months starting on 1.6.2022.

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