Why does the government give tax refunds

Business tax refund advance payment

The tax law aid program is growing: in order to provide companies with the necessary liquidity quickly, they can offset profits from 2019 against losses in connection with the corona pandemic when adjusting prepayments. This gives rise to claims for tax refunds.

“Companies still urgently need liquidity. With the new regulation, we will enable a further injection of fiscal liquidity in addition to the ongoing aid, ”said Finance Minister Edith Sitzmann on Saturday (April 25). “That can be up to several 100,000 euros per company - money that many companies currently need very urgently. That is why we are implementing the innovation as quickly and unbureaucratically as possible. "

Tax injections of liquidity - as quickly and unbureaucratically as possible

The tax assistance is based on the consideration of a so-called loss carry-back when assessing advance payments. In fact, companies can use it to compensate for losses in the current year with profits from the previous year, so that advance payments already made on income or corporation tax can be subsequently reduced and paid out to the companies. In order to be able to grant companies reimbursements quickly, a flat-rate loss of 15 percent of the last profit on which the advance payments were based is assumed for the calculation of the advance payments for 2019. Applications for the reimbursement of advance payments can be made by companies that made profits in the past year, whose tax advance payments for 2020 were reduced to zero due to the effects of the corona pandemic and which also expect significant negative income. The exact billing takes place with the tax assessment for the year 2020, that is in the coming year at the earliest.

"In Baden-Württemberg, many healthy and solidly operating companies have suddenly and through no fault of their own slipped into the red," said the finance minister. “The crisis is hitting our medium-sized businesses and the many family businesses hard. We have a particular eye on you when it comes to the tax liquidity injection. "

Biggest tax law utility ever

In the past few weeks the finance ministers of the federal states and the federal government have launched the largest aid program in tax law that has ever existed. For companies affected by the effects of the pandemic, for example, tax payments are deferred without interest, advance payments can be reduced, enforcement is currently waived, late payment penalties and late payment penalties are waived. In addition, special payments for employees of up to 1500 euros can be tax-free during the pandemic.

There were also innovations for non-profit institutions that relieve them during the pandemic. For example, non-profit associations can offer auxiliary services regardless of their statutory purpose without risking their tax breaks. Where there are financial gaps due to the corona crisis, earmarked reserves can be used.

Companies that would like to make an advance payment for loss carry-back should contact their responsible tax office.

Letter from the Federal Ministry of Finance, in which the advance payment for loss carry-back is regulated

Ministry of Finance: Overview of all tax aids (PDF)

Ministry of Finance: Answers to frequently asked questions about tax breaks during the corona pandemic

Current information on the coronavirus in Baden-Württemberg