Germany: a tax-free Corona-Bonus for employees

Spring is the season of bonuses and other profit-sharing payouts, particularly in the automotive sector. Looking at the industry’s major manufacturers, bonuses amount to €5,900 at BMW (€3,275 lower than in 2018), €597 at Daimler (a decrease of €4,368 year on year), €4,950 at Volkswagen (up €200), €3,880 at Audi (up €250) and €436 at Continental (down €750). However, because of the Covid-19 crisis, a new bonus option has been introduced this year for all business sectors, dubbed the “Corona-Bonus”. The idea of this bonus came from the observation that a portion of employees working in sectors that are “strategic” to companies’ functioning during lockdown and to the fight against Covid-19, are more exposed than average to the risks of infection and deserve more than mere applause. As such, the bonus was included in the package of measures introduced by the extensive economic aid programme voted by the Bundestag on 25 March. A few days after the vote, Germany’s finance minister also guaranteed that this Corona-Bonus would be tax free. Therefore any company can decide to pay a one-off, exceptional bonus known as the Corona-Bonus, which is tax-free up to a limit of €1,500. The offer is valid from 1 March 2020 to 31 December 2020. There are conditions, however; a bonus that has already been promised cannot be converted into a Corona-bonus, while the latter must be paid in addition to wages and must not form part of these. Finally, it is also possible to pay the Corona-Bonus in vouchers of the same value. Some companies are discussing the possibility of converting the 13th month of pay for 2020 into a Corona-Bonus. For the employees concerned, the benefit would be significantly lower, but it would be somewhat advantageous since the 13th month is ordinarily subject to tax (a deduction of approximately €600 in social security charges and taxes for the employee from a classic bonus of €1,500).