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BUDGET

Government approves €8.5-bln fiscal package

The German government on Monday adopted a package of fiscal measures worth €8.5 billion ($12.7 billion) including tax cuts and benefits aimed at underpinning economic growth.

Government approves €8.5-bln fiscal package
Photo: DPA

The new centre-right coalition formed last month adopted an “accelerated growth law” that is expected to be quickly by parliament.

The bill includes a lowering of value-added tax (VAT) in hotels and restaurants to 7.0 percent, a reform of business inheritance laws and some cuts in corporate taxes.

Companies will be the main beneficiaries but families will also receive an additional €20 per month for each child.

The measures are expected to take effect on January 1, and constitute “positive long-term support for growth,” a Finance Ministry statement said. German authorities have decided to allow the national deficit to grow as they try to get Europe’s biggest economy back on track towards sustainable growth.

Chancellor Angela Merkel’s new cabinet has also said it would reform the tax system and cut taxes by €24 billion starting in 2011, but a spokesman for Merkel was more reserved on that question.

“We will focus initially on putting the first part into action,” the spokesman said, before looking at further reforms in mid 2010.

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CROSS-BORDER WORKERS

Germany and France extend Covid tax breaks for cross-border workers

Germany and France have agreed to extend the relaxation of tax rules for cross-border workers until the end of the year.

Cross-border workers commute by car but they can for now continue to work at home
Cross-border workers usually have to commute but can for now continue to work at home.. Photo: Fabrice Coffrini / AFP

The agreements between France and the governments of Belgium, Luxembourg, Germany, Switzerland and Italy avoids double taxation issues for anyone travelling across the French border to or from those countries in order to work.

During the pandemic, tax rules were eased to allow French cross-border employees, like their counterparts in Belgium, Luxembourg, Germany, Switzerland and Italy, to work from home without having to change their tax status.

The deals, which were established at the beginning of the health crisis in March 2020, were due to end on September 30th – and would have plunged cross-border workers still working from home because of the health crisis into renewed uncertainty over their taxes.

The latest extension of these agreements means there’s no confusion over where a cross-border worker pays their taxes until December 31st – for example cross-border workers who work in Geneva but live in France, who normally pay their taxes and social security contributions in Switzerland. 

Under normal circumstances, anyone living in France who works in Switzerland can spend no more than 25 percent of their time working from home. If they exceed this time limit, they would have to pay these tax charges tin France rather than in Switzerland, which would be much higher.

The agreements between France and Belgium, Luxembourg, Germany and Switzerland “provide that days worked at home because of the recommendations and health instructions related to the Covid-19 pandemic may … be considered as days worked in the state where [workers] usually carry out their activity and therefore remain taxable,” according to the statement from the French Employment Ministry.

In the case of Luxembourg, days worked from home because of the health crisis are not counted in usual the 29 day limit.

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