EXPLAINED: How Germany plans to support families and businesses in the pandemic

EXPLAINED: How Germany plans to support families and businesses in the pandemic
A father and child playing in the snow in Hanover on January 30th. Photo: DPA
A new Kinderbonus, support for low-income earners and aid for companies and culture - here's how the government's new aid package will affect you.

The German government has agreed a new package worth billions of euros to support people in need during the coronavirus pandemic.

The grand coalition – made up of Angela Merkel's Christian Democrats, the CDU's Bavarian sister party the Christian Social Union and the Social Democrats – agreed on Wednesday to provide billions in support for families, low-income earners, businesses, plus the hospitality and culture industries.

“We have achieved a lot for families, for people with a difficult income situation, but also for tradespeople and the catering industry,” said SPD co-leader Norbert Walter-Borjans.

The most important thing is for Germany to offer “a bit of help” to people who had come under pressure during the tough shutdown, he added.

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Here's a look at what they agreed:

KINDERBONUS: Families will receive another one-off Kinderbonus, as they did last year. The supplement to the child benefit (Kindergeld) is to be a one-time payment of €150.

Families with small and medium incomes are to benefit, as the payment will not be offset against other family or social benefits – but it will be offset against parents who receive tax relief (Kinderfreibetrag).

Last autumn families received €300 in two instalments of €150. It was paid to parents alongside Kindergeld.

The payment was billed as a thank you to parents who have had to take over the teaching and care of their children when schools and kindergartens have been closed in the pandemic. It was also part of a package that included a drop in VAT to kickstart the economy.

READ ALSO: How Germany plans to increase child benefits and provide tax relief

CORONAVIRUS GRANT AND INCOME SUPPORT: Adult recipients of social security are now also to receive a one-time grant of €150. For self-employed people and employees with low incomes who suddenly find themselves in need, the facilitated access to benefits will be extended until the end of 2021.

COMPANIES TO RECEIVE RELIEF: The grand coalition is giving companies with corona-related losses more help. By means of an extended loss carryback, affected firms will be able to offset losses against profits from previous years in their tax returns to a greater extent than before.

The government plans to double the loss carryback to a maximum of €10 million or €20 million in cases of joint tax assessment.

READ ALSO: Is Germany doing enough to ensure small businesses survive the coronavirus crisis?

VAT DROP FOR HOSPITALITY: Bars, restaurants, cafes and hotels have been hit particularly hard hit by the shutdown. Until the end of June, a reduced VAT rate of seven percent applies to food in cafés and restaurants.

The only issue is that the restaurants have been closed for in-door dining since November. Therefore, the reduced rate is now to continue to apply until the end of 2022.

Last year Germany introduced a general VAT cut from July 1st until December 31st. That is not planned this year.

CULTURE: A rescue programme called “Neustart Kultur” (Restart Culture), a comprehensive programme aimed at restarting cultural life in Germany, will be extended. On top of that, a follow-up programme with an additional fund of a billion euros will be launched.

HOW MUCH WILL THIS COST?: The coronavirus grant for recipients of basic income support and the child bonus will cost the state about €3 billion, while the programme for the cultural sector will cost €1 billion.

The lower VAT in the catering industry is to amount to about €3.5 billion.

The financial effects of the tax relief for companies are difficult to estimate at present.

According to the SPD, the new aid will come from the existing financial framework without a supplementary budget.


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