Tax-free inflation premium may start flowing from Oct. 27

Thu 27th Oct, 2022

Photo by Ibrahim BoranThe date for the earliest possible transfer of the inflation bonus of 3000 euros without deductions by employers has been set. "The tax-free payment of the inflation bonus is possible from October 27," CDU Member of Parliament Olav Gutting told the F.A.Z. The day before, he understands, the regulation will be promulgated in the Federal Law Gazette. On the following day, the tax exemption will come into force. Until the end of 2024, employers will then be able to pay their employees up to 3,000 euros tax- and social security-free.

In the Union faction one had registered some inquiries, when this would be possible. Gutting is the responsible rapporteur there. The Bundesrat had approved the law on October 7. "It is a pity that the promulgation has now taken so long," Gutting said. If the Federal Ministry of Justice had been quicker in promulgating the law, the first payments could have been made earlier.

With the attractive special payment, the federal government wants to ensure that the current particularly high inflation rate of 10 percent recently does not lead to permanently increased salaries and thus set in motion a wage-price spiral.

There is already a collective agreement in the chemical industry that has taken up the coalition's offer. The agreement reached last Tuesday not only provides for the current collectively agreed salaries of chemical employees to be raised by 3.25 percent in both January 2023 and January 2024, but also includes two one-time payments of 1,500 euros each, which must also be paid out by these two January dates at the latest, but should flow earlier if possible.

The Federal Ministry of Finance puts the tax revenue reduction associated with the inflation compensation premium at around 1.2 billion euros. Every employer can take advantage of the tax and contribution exemption for such payments. But one condition is important: for the bonus to be tax- and duty-free, it must be granted in addition to the wages owed anyway.

Photo by Ibrahim Boran


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