A. Tax classification of COVID19 grants
The COVID19 emergency grants-in-aid from the German federal and state governments are taxable grants and must, therefore, be treated as operating income. Accordingly, they must be recognized in the determination of income as other operating income; as real subsidies, they are not subject to VAT.
B. Correct use of the COVID19 grants:
I. Check for eligibility:
1) Requirements for ALL grants (from the federal and state governments in Germany):
2) Correct use of the grants:
Although it is not yet clear when and how the use of the grants will be examined, future control has already been announced, most likely to be performed by the tax authorities. For this period, proficient accounting will be particularly important and valuable to avoid the need for additional documentation. Proficient bookkeeping allows a third party to recognize the validity of the supporting documents by means of precise booking text details.
III. Correction options in cases of misuse of grants
Excessively requested grants constitute the criminal offence of subsidy fraud. Entrepreneurs should NOW check whether subsidies have been properly applied for and received in the correct amount; otherwise, they have the opportunity NOW to return excessively requested funds to the grant providers (IBB, etc.). It is sufficient to enter the assessment number and the word “Ueberzahlung” (overpayment) in the purpose line of the bank transfer. The assessment number is to be found in the approval email of the grant donor.