Article Germany: Tax Relief Measures Adopted to Offset High Energy Costs Due to War in Ukraine

On March 23, 2022, and April 27, 2022, the German government agreed on several tax relief measures to offset the financial consequences of rising energy costs resulting from the Ukraine crisis. Most of the measures have since entered into force or been adopted by the German Bundestag (parliament) and, when necessary, by the Bundesrat (the constitutional body through which the German states participate in the legislative process) and are expected to be published in the German Federal Law Gazette soon.

Content of the First Tax Relief Package

The First Tax Relief Package contained the following measures:

  • Elimination of the Renewable Energy Levy: With the Bundestag’s passage of an amendment to the German Renewable Energy Act (Erneuerbare-Energien-Gesetz, EEG 2021) on April 28, 2022, consumers will no longer have to pay a levy for renewable energy starting on July 1, 2022. No consent of the Bundesrat is needed for the amendment. The renewable energy levy for 2022 amounts to 3.72 cents per kilowatt hour and is charged as part of the energy bill.
  • One-Time Heating Cost Allowance: People who receive a housing allowance and trainees and students who receive funding under the Federal Training Assistance Act (BAföG) will receive a one-time heating cost allowance of 270 euros (€) (about US$284) and €230 (about US$242), respectively. (Heating Cost Allowance Act §§ 1, 2.) The amendment will enter into force on June 1, 2022, and automatically expire on May 31, 2032. (§ 8, para. 1.)
  • Raising of the Employee Standard Allowance, Minimum Tax-Exempt Income, and Commuting Allowance: The employee standard allowance will be raised by €200 (about US$210) to €1,200 (about US$1,260); the minimum tax-exempt income by €363 (about US$382) to €10,347 (about US$10,867); and the commuting allowance to €0.38 (about US$0.40). These three measures are slated to become effective retroactively from January 1, 2022, and are part of the draft Tax Relief Act 2022. The Tax Relief Act 2022 was passed by the Bundestag on May 13, 2022. The Bundesrat gave its consent on May 20, 2022. Other parts of the act will enter into force one day after publication in the Federal Law Gazette.

Content of the Second Tax Relief Package

  • Temporary Lowering of the Energy Tax on Motor Fuels: The government agreed to lower the energy tax on motor fuels for a period of three months to the minimum level of taxation as allowed by annex I of the Energy Tax Directive of the European Union. This means that the tax on gasoline will be reduced by 29.55 cents/liter (ct/lit), on diesel by 14.04 ct/lit, on compressed and liquified natural gas by 6.16 ct/kg, and on liquefied petroleum gas by 12.66 ct/lit. The Bundestag passed the proposal on May 19, 2022. The Bundesrat gave its consent in its session on May 20, 2022. Most parts of the act are slated to enter into force on June 1, 2022, after it has been published in the Federal Law Gazette.
  • One-Time Energy Cost Allowance and Additional Child Allowance: All working persons subject to income tax will receive a one-time energy cost allowance of €300 (about US$315). Each family will receive a one-time additional child allowance of €100 (about US$105) per child in 2022. These measures were added to the Tax Relief Act 2022 mentioned above.
  • One-Time Payments for Social Security and Unemployment Benefit Recipients: Recipients of social security will receive a one-time payment of €200 (about US$210) and recipients of unemployment benefits will receive a one-time payment of €100 (about US$105). The Bundestag adopted these and related measures on May 12, 2022. The Bundesrat gave its consent in its session on May 20, 2022. Most parts of the act are slated to enter into force on June 1, 2022, after it has been published in the Federal Law Gazette.
  • Discounted Public Transit Tickets: The German states will receive additional funding to finance a public transit ticket discounted to €9 per month. All persons will be able to use the discounted ticket nationwide for three months from June to August 2022. It is intended to offset rising costs for energy, groceries, heating, and mobility, as well as incentivize people to switch to public transportation to save on fuels. The Bundestag adopted the measure on May 19, 2022. The Bundesrat gave its consent on May 20, 2022. The act is slated to enter into force on June 1, 2022, after it has been published in the Federal Law Gazette.
Updated with correction to “Content of the Second Tax Relief Package” on May 23, 2022.

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Germany: Tax Relief Measures Adopted to Offset High Energy Costs Due to War in Ukraine
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Germany: Tax Relief Measures Adopted to Offset High Energy Costs Due to War in Ukraine. 2022. Web Page. https://www.loc.gov/item/global-legal-monitor/2022-05-23/germany-tax-relief-measures-adopted-to-offset-high-energy-costs-due-to-war-in-ukraine/.

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