New BMF letter allows partial refund of tax advance payments made in 2019
In order to ensure liquidity, especially for small and medium-sized enterprises, the existing options for reducing or refunding tax advance payments were further expanded by letter dated 24 April 2020:
For companies of all legal forms that expect to make a loss in 2020, it is possible to get back 15% of the tax prepayments made in 2019. This refund is limited to 150.000 euros or 300.000 euros if spouses file jointly (for a GmbH, the maximum amount is therefore 150.000 euros). The refund has so far been limited to advance payments made for corporation tax or income tax. If it subsequently turns out that a profit was made in 2020, the refund granted must be repaid in full. This check will only be carried out when the tax returns for 2020 are submitted, which are not due until 2021/2022. In this respect, the refund is available to the company for a longer period of time.
The following example illustrates how it works:
1 example:
In 2019, company A made advance payments for income tax amounting to 50.000 euros and, due to the corona pandemic, a loss is expected for 2020. Company A can now receive an additional refund of 15% of the advance payments made in 2019 (i.e. 7.500 euros) from the tax office as liquidity support. If, contrary to expectations, a profit is declared in the annual financial statements or when submitting the income tax return for 2020, the refund of 7.500 euros received must be repaid.
2 example:
In 2019, B-GmbH made advance tax payments for corporate tax amounting to EUR 500.000. B-GmbH is also affected by the corona pandemic and expects a significant loss for 2020. B-GmbH can also receive a refund of EUR 75.000 (15% of EUR 500.000) as additional liquidity support. If, contrary to expectations, a profit is made in 2020, the refund of EUR 75.000 received must again be refunded in full.
So far, we assume that the refund will be granted by submitting an informal application to the tax office. In our opinion, however, care should be taken to document the requested refund and the expected loss for 2020 with the help of a planning calculation. Nothing is currently known about the extent to which these reliefs also apply to trade tax.
