Tax measures as part of the Flood Compensation Act - updated

The following is a brief summary of the information provided by the BMF in this regard:

Monetary or in-kind donations, which are provided in connection with disaster relief (particularly flood, landslide, mudslide, and avalanche damage) are, within the scope of operational advertising expenses, to be considered as Business expense deductible. (§ 4 Para. 4 Item 9 EStG)

:: Donations from Private are unfortunately still subject to taxation non-deductible.

:: For the period from 1 June 2002 to 31 December 2003, a special arrangement applies to a Early depreciation in the case of replacement purchases of buildings and other assets following a disaster (12 %: accelerated depreciation on the construction of buildings; 20 %: on the acquisition or construction of movable assets. Section 10c of the Income Tax Act (EStG))

:: As an alternative to an accelerated depreciation for tax purposes, as defined in Section 10c of the German Income Tax Act (EStG), temporary Special bonuses may be claimed for the replacement of depreciable fixed assets directly related to the repair of flood damage. The special allowance amounts to 5 % of the expenditure for the replacement of buildings and 10 % of the expenditure for the acquisition or production of other assets. In this context, it should be noted that the special allowances must be claimed in the tax return for the relevant year.

Extension of time: In the context of 2002 Economic Stimulus Package introduced accelerated depreciation for the manufacture of buildings is bis to 31 December 2003 extended. Note: Subsidies and donations reduce the acquisition and production costs from which depreciation is calculated.

Exceptional Burden
The costs of rectifying damage to property caused by a disaster can be offset against tax without a deductible. However, your own labour cannot be taken into account.

– Cost centres
Disaster recovery
All costs are fully deductible within the paid amount. This particularly includes cleaning, drying, etc., regardless of whether it concerns a primary residence, a second home, or a luxury item (e.g., a sauna).
Repair costs
Only the costs for repairs of items that are needed for normal day-to-day living can be claimed (not, for example, for a swimming pool).
Replacement purchase
These are only included to the extent that the items are needed for normal daily living (not, for example, sports equipment).

– Cost implications
While the costs for the remediation of damage and the repair of essential items are fully deductible, there are certain upper limits for the replacement of items, namely: for the purchase or manufacture of essential items, the „Original price“. For Car is the „acquisition – Time value“ capped at €34,000,–. However, replacement costs can only be claimed for the main residence. The full amount of replacement costs for essential household contents is tax-deductible. Hand-knotted carpets, however, are only deductible up to a maximum of €730,– per m², antiques up to a maximum of €7,300,– and clothing up to a maximum of €2,000,– per person living in the household.
The following are to be deducted from the damage sum: insurance benefits, tax-free subsidies and donations, as well as proceeds from the sale of replaced items. If the expenses cannot be covered by current income, loan repayments including interest represent an extraordinary expense.

– Method of assertion
The commission report on the damage assessment and the invoices must be submitted to the tax office.

:: Extension of deadline Applications for and reduction of advance payments for income and corporation tax can be submitted until 31 October 2002. (§ 45 para. 5 EStG)

:: Employee can a separate Allowance apply to the tax office if it is credibly demonstrated that there were exceptional burdens in the calendar year 2002 for the elimination of disaster damage. The same applies here: The disaster-related replaced assets can be deducted up to the proven new value of the destroyed assets. This application is to be considered separately from a conventional employee assessment and must be submitted by 25 November 2002 at the latest; the tax exemption notice must be issued by 15 December 2002.

:: The Contaminated Sites Remediation Act now stipulates that Waste disposals (depositing, backfilling, storing and transporting) that can be directly linked to the disaster are exempt from the contribution obligation. (§ 3 para. 4 Contaminated Sites Reclamation Act)

:: Other tax measures (BAO § 206): The Federal Tax Code has been amended to allow donations in disaster situations to be exempt from gift tax. Furthermore, no fees are payable for the replacement issue of documents (e.g. passports, driving licences, registration certificates, birth certificates) as well as for loan and credit agreements. This option was first used in the course of the flood disaster.

:: Tax status of the recipient of donations
Regardless of whether it is a private individual, a company, or an employee of a company, no taxable income is generated. Cash or in-kind benefits provided to employees affected by disasters by their employer are exempt from all ancillary wage costs (wage tax, social security, employer contribution, municipal tax).

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