Germany’s Energy Price Allowance Payments for Employees—What Employers Need to Know

Under the new German Tax Relief Act 2022, as of September 1, 2022, employees subject to income tax are entitled to a one-time lump-sum energy price allowance in the amount of €300. The allowance is intended to mitigate the currently high consumer costs for electricity and fuel.

Employers are required to pay the €300 energy price allowance to all employees and apprentices that they employ on September 1, 2022, and, subject to wage tax classes I to V, regardless of the duration and scope of the employment relationship. Payments would be made in the course of the September 2022 payroll cycle. They would be subject to wage tax withholdings but exempt from social security contributions.

The Tax Relief Act 2022 includes special rules that apply to individuals working in so-called mini-jobs (i.e., employees who are marginally employed). These employees must confirm upfront in writing to their employers that their marginal employment is their primary employment. The law requires that the confirmation be kept with the wage tax documentation. For mini-jobs taxed at a flat rate, the energy price allowance is tax free.

The law provides that employers would be reimbursed for the energy price allowance payments they make in the course of their payroll wage tax declarations. For this purpose, they may set off the energy price allowance payments against the total amount of wage taxes they have to declare and pay to the tax authorities in the month in which allowance payments were made.