Back in April, the German Ministry of Finance announced that special payments for employees will be exempt from tax and social security contributions due to COVID-19.

This exemption has allowed for employers to pay grants and subsidies up to 1,500 euros per employee between 1 March 2020 and 31 December 2020, free from tax and social security contributions, provided that the special payments are paid in addition to wages owed anyway. Special payments can be granted in either cash or in kind.

The tax-free benefits should be recorded in the payroll account and any other tax exemptions and valuation allowances remain unaffected. This also benefits the employer as no employer social security contributions are due on this.

For more information on Germany's labour laws, tax, and payroll landscape, browse activpayroll’s Germany Global Insight Guide: find background on Germany's global economic profile, major industrial sectors and common business practices.

For more information on coronavirus support measures for employers and employees, visit the activpayroll latest news page.

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