“Corona allowances” free of tax and social security contributions in 2020

Employers can pay out extra payments or bonuses to their employees up to an amount of 1,500 Euros free of tax and social security contributions. This applies to the additional benefits that employees receive between 1 March 2020 and 31 December 2020.

The precondition is that the extra payments or bonuses are paid in addition to the wages, bonuses and commissions contractually owed. It is irrelevant whether the benefits are paid monthly or as a lump sum.

The tax-free benefits must be recorded in the payroll account. Other tax exemptions and valuation allowances remain unaffected.

The tax and contribution-free nature of the special payments recognises the special and indispensable contribution made by employees during the Corona crisis. There must have been a hardship the employee has faced during the crisis. This has to be documented and taken to the salary account for future audits.

A special hardship can be:

• Video conferences instead of personal meetings
• Travel into corona hotspots with obligation to a test afterwards or quarantine
• Obligation to wear a mask or other protective clothing
• ….

The so-called "corona allowance" or "corona premium" is not tied to a special branch. It can be paid by all employers.