Ukraine War – Tax treatment of the support measures
Documentary proof of donation
For donations paid via a special account opened for this purpose by an independent social welfare association that is recognised in Germany, by its member organisations, by a German public agency or a German public sector company, a paying-in slip or a bank payment confirmation (e.g. a bank statement or a printout from a PC in the case of online banking) would provide sufficient proof of a donation. The respective documentary proof would have to be provided upon request by the fiscal administration and retained for up to one year following the issue of a tax assessment notice. Special regulations apply for donations paid via trust accounts.
Donations from business assets
Spending on support measures for victims may be tax-deductible as business costs under the conditions of the ‘Sponsoring Regulation’ (Sponsoring-Erlass), i.e., if the enterprise aims to generate economic benefits for its business via the spending. Such benefits could be, for example, ensuring or enhancing the reputation of the business and this could be achieved via, among other things, a highly visible public display of the company’s services.
If, on the basis of such criteria, these amounts cannot be deemed to be a business expense then they may be deducted as donations in accordance with the general requirements as well as the ones mentioned above.
The waiving of salaries and supervisory board remuneration
If employees waive payment of parts of their salaries or parts of their accumulated working time credits so that their employer can provide tax-free financial assistance and support to victims of the war in Ukraine who are employees of the company or of affiliated companies, or are employees of business partners then these amounts would not constitute taxable remuneration of the waiving parties. This would be on condition that the employer uses the amounts that have been waived by the employees accordingly and also documents this. These amounts would not constitute donations on the part of the employees. The same would apply if employees waived their salaries or working time credits on condition that the employer donates the equivalent amount to an organisation that is authorised to receive donations. The same would ultimately apply if a supervisory board member waived part of their remuneration before its due date or prior to its payment. From the point of view of the company, it should however be noted that, pursuant to the German Corporation Tax Act, the non-deductibility of half of a supervisory board member’s remuneration would also extend to the amount that is waived by the member of the supervisory board.
If a company provides items or personnel free of charge, for example, to relief agencies, facilities for refugees and for the care of the wounded, or something similar, then no VAT would be levied on the unpaid benefits in kind. If a business already intends to use a resource in this way when it is obtained then the company would nevertheless still be entitled to deduct input tax.
If hotels and providers who let out holiday homes, etc., and normally charge VAT when they rent out their accommodation, make their accommodation available to war refugees free of charge then no VAT should be levied on the unpaid benefits in kind and no adjustments made to the input tax deduction.