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ENERGY

Who gets Germany’s €300 energy relief payout – and when?

As part of a package to ease the rising cost of living, the German government is set to give taxpayers in employment a one-off payout. Here's what we know so far.

A customer holds cash in a shop in Hamburg. Germans are seeing a huge rise in the cost of living.
A customer holds cash in a shop in Hamburg. Germans are seeing a huge rise in the cost of living. Photo: picture alliance/dpa | Jonas Walzberg

Germany has approved a special package to provide financial relief to people during the cost of living crisis. 

Among the measures in the Tax Relief Act is a €300 allowance known as the Energiepreispauschale or EEP in Germany, which employers will have to pay out to their staff later this year. Self-employed people will also receive it. However, the payment is taxed for everyone who receives it. 

It is aimed at providing financial relief to workers in Germany dealing with soaring energy bills. 

READ ALSO: KEY POINTS- What Germany’s budget means for you

Which employees receive the payout?

All employees in tax brackets one to five who are in employment in 2022, as well as people in marginal and short-term employment (i.e. people with mini jobs and temp work) who pay flat-rate tax on their wages, will get the cash boost.

“Marginal or short-term employees must confirm in writing to the employer that the marginal employment is their first employment relationship,” Ecovis tax consultant Magdalena Glück, who’s based in Dingolfing, told trade site Handwerksblatt.

This prevents the energy price lump sum from being paid out twice. All those who were employed as workers at some point in 2022 will receive the €300, whether it’s through their employers or an income tax assessment. 

The SPD (Social Democrats) parliamentary group in the Bundestag said “44 million working people will be relieved quickly and unbureaucratically” through the payment. 

When and how do employers pay out the lump sum?

Employees should receive the cash boost with their September wages. For this purpose, the employer will add an “E” on the pay slip certificate detailing the amount. 

“If employers do not pay the wage tax monthly – but quarterly instead – the energy price lump sum can also be paid out in October,” said Glück.

The lump sum is free of social security contributions – but it will be subject to tax for most people. “For mini-jobs taxed at a flat rate, the €300 is tax-free,” said Glück. 

A woman turns down a radiator in Germany.

Energy prices have been significantly rising in Germany. Photo: picture alliance/dpa | Marcus Brandt

Glück added that it was extra bureaucracy for employers.

“Many citizens will be happy about the money. But for employers, the energy price lump sum is additional work,” she said.

Do self-employed people also get the lump sum and if so, how?

As well as employees, freelancers tradespeople and other self-employed workers also receive the lump sum. For them, the payout is considered other income – but the exemption limit of €256 is not applied.

They receive the lump sum by reducing their advanced income tax payment in September, provided the advance payment reaches the amount of the lump sum. 

Employees who are not in employment on September 1st and self-employed people with low advance payments are granted the flat-rate energy allowance via their income tax return without submitting a separate application.

“If no advance payment is made, the amount can only be taken into account in the income tax assessment,” said Glück. “This happens automatically,” she added.

READ ALSO: Will freelancers benefit from Germany’s €300 energy allowance?

What about people who’ve retired?

Pensioners who are not in employment in 2022 are not entitled to the payout. However, according to reports in German media, if they work for a short time in 2022 – even if that’s a one-day mini-job – they are entitled to the payment.

CDU financial expert Antje Tillmann even recommended a special trick to try, 

“It is sufficient, for example, for a pensioner to look after his grandchild for one hour in 2022 and receive €12 minimum wage from his children in return as part of a mini-job or from self-employment,” said Tillmann told German daily Bild. “Subsequently, he declares this income in his tax return, gets the energy price lump sum paid out in May 2023.”

Tillmann recommended that the “salary” be paid out via a bank transfer so that it can be presented as a mini-job.

We’d recommend you chat to an expert such as a tax consultant to see your options. 

How much of the €300 will people actually receive?

“That varies from person to person, because the EEP is subject to the personal income tax rate,” said Glück.

It means that people with a low income will have to pay little or no tax at all, while those with a high income will receive less of the payment. 

The payout has been designed that way on purpose. “Since taxation increases with income, a social design for the flat rate is achieved,” said the SPD in a press release

Some cash and an EC card.

Some cash and an EC card. Photo:
picture alliance/dpa | Arne Dedert

The German government expects additional tax revenue from the energy price flat rate of €3.4 billion. On average, people who get it will be left with around €226.

As well as income tax, surcharge taxes such as church tax and the solidarity surcharge may further reduce the lump sum in some cases.

As we mentioned above, people who have mini-jobs who are taxed at a flat rate should be happy: for reasons of simplification, lawmakers have decided to waive taxation here.

How do employers get their money back from the government?

The energy price flat rate is offset against tax.

“The employer therefore simply pays less wage tax to the tax office,” said Glück. “If employers have to pay out more EEP to employees than they pay in wage tax, they get the difference from the tax office.”

What other payouts are people receiving?

As well as the €300 payout, families will receive a one-off Kinderbonus of €100 per child this year. The bonus will be paid out with the child benefit payment in July.

There will also be a €200 payout for people on social welfare, and €100 for people on the unemployment benefit Arbeitslosengeld I.

Meanwhile, a €270 heating cost allowance for people on housing benefit, and €230 for students receiving state support (BAfög) is also planned.

In total, the law provides around €4.46 billion of financial relief for people in Germany this year.

READ ALSO: Why people in Germany have longer for their tax return this year

As with all of our tax and financial summaries, this is a guide only and should not be taken to constitute specific and tailored financial advice. For tax advice which is personalised to your situation, please contact an accountant or tax specialist. 

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For members

TAXES

Do foreigners in Germany owe tax on money that is inherited from overseas?

If you received an inheritance worth at least €20,000 in 2023, there's a good chance that it will affect your taxes this year. Here's how German inheritance tax is applied to foreigners and foreign assets.

Do foreigners in Germany owe tax on money that is inherited from overseas?

Inheritance tax (Erbschaftssteuer) has been collected in Germany since 1906, and it also applies to foreign residents.

This tax is levied on assets, like money or real estate, that are received from a deceased person. 

Germany’s current inheritance tax law has been in force since 1955, and is applied to the total value of all assets that are passed on, excluding diaries, clothing and furniture. 

It also comes with relatively high allowances for close relatives such as spouses and children.

Does inheritance tax apply to foreign assets?

Long-term and permanent residents in Germany will likely be subject to the tax, even when the inheritance is coming from abroad.

Put simply, German inheritance tax is applied when either the deceased or the heir legally resides in Germany at the time that the inheritance is claimed. 

Habitual residence is generally established when one has lived in Germany for six-months, but may be applied sooner in some cases. So the tax does apply to most long-term foreign residents regardless of their specific visa or residency status.

READ ALSO: I just got married in Germany. How does this affect my taxes?

Additionally, German nationals are still considered residents for up to five years after moving abroad.

So an American resident receiving an inheritance from their relative who lived in Germany, for example, may be taxed, and conversely a German resident receiving inheritance from their American relative would also be taxed.

In both of these cases, your inheritance is subject to ‘unlimited tax liability’ – meaning that the entire value of the inheritance is taxed.

If you and the deceased are both legally domiciled abroad, then you may still be subject to ‘limited tax liability’ – meaning that tax is only owed for parts of the inheritance that are located in Germany, such as property or a savings account held in a German bank.

How much inheritance can you receive before it’s taxed?

The amount of tax owed depends on the value of the inheritance and also on one’s relation to the deceased. 

Inheritances are also granted significant allowances in Germany. Allowances refer to the amount of money you can receive without having to pay any tax.

Spouses and registered partners, for example, pay no tax on the first €500,000 worth of inherited assets. Children, step-children and grandchildren whose parents have already passed away are granted a €400,000 allowance, whereas grandchildren with living parents get a €200,000 allowance. Great-grandchildren, parents and grandparents get a €100,000 allowance. All other relatives or unrelated heirs receive a €20,000 allowance. 

Regardless of allowances, all inheritances worth €20,000 or more need to be declared.

Additional allowances apply to specific situations, such as a special pension allowance for spouses or children who don’t receive widow or orphan pensions. These currently amount to €256,000 for spouses and civil partners, and between €10,300 and €52,000 for children, depending on their age.

Immediate family who cared for the deceased before death can apply for up to €20,000 in care allowance.

Additionally, there is a lump sum allowance of €10,300 for “estate liabilities”, such as funeral costs, gravestone, and grave maintenance fees.

Will I be doubled taxed by Germany and my home country?

Germany has Double Taxation Agreements that cover inheritance and estate taxes with the USA, Greece, France, Sweden, Denmark and Switzerland.

In some cases these agreements can override German domestic law, and will likely affect how much tax you owe.

Generally these agreements allow tax payers to avoid double taxation by offsetting the foreign tax against the German tax or vice versa. For example, if you have already paid an inheritance tax on assets coming from the USA, then the amount you paid in US taxes may be taken off the amount that would be owed in Germany.

In this case it would be advisable to seek consultation from a tax professional who is familiar with German tax law and the Double Taxation Agreements Germany has with your country.

How much tax will you owe?

If you received an inheritance that exceeds your allowance level, calculating the amount you owe can be a bit complicated.

READ ALSO: Should you get a tax advisor in Germany – and how much does it cost?

There are three inheritance tax brackets, which are based on your relation to the deceased and have no relation to the tax brackets for income tax. 

Immediate family of the deceased, such as spouses, children or grandchildren are included in tax class I, and can generally expect to be taxed at a rate between seven to 11 percent. Non-related heirs are included in tax class III and can expect to pay a 30 percent tax on inheritances up to €13 million, or 50 percent for inheritances above that.

For more information on Germany’s inheritance taxes, we have a guide to the topic.

You can also use tax calculators like this one by Steuertipps.de, or this one by Steuerklassen.com to get an idea about how much tax you may owe.

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