As a result of the outbreak of the Corona virus, are the 'temporary unemployment' benefits treated differently from the existing benefits from a tax point of view?
No. The existing tax provisions do not allow a distinction to be made between benefits resulting from temporary unemployment due to the outbreak of the Corona virus and other unemployment benefits.
You can consult the main principles of the tax system of those temporary unemployment benefits below.
Are the unemployment benefits and any additional allowances I receive as a result of temporary unemployment taxable?
Yes, these unemployment benefits and any additional allowances are taxable in income tax at the ordinary tax rates (i.e. the progressive rate, which means that the rates increase as your income increases).
Are these unemployment benefits and additional allowances eligible for a tax reduction?
In principle they do. However, the application of a tax reduction to these allowances and their amount depends on a number of factors.
If, for the year 2020, in addition to these allowances as a result of temporary unemployment, you have also received remuneration as an employee or other income (e.g. real estate income), the amount of the tax reduction will be limited.
The calculation of the tax reduction is technically complex. It consists of two parts, i.e. a basic reduction and possibly an additional reduction. If, for example, you also received remuneration as an employee for the income year 2020, you can only claim the basic reduction. In principle, this amounts to a maximum of EUR 1,828.41, but will be reduced according to your other income (see questions 4 and 6).
Could it be that the tax reduction in my case is only a fraction of the maximum amount or even equal to zero?
This is possible.
If your unemployment benefit and supplementary allowance only amount to a small part of the total amount of your taxable income (professional income, movable and immovable income, miscellaneous income), the tax reduction will only be very limited or even zero.
For example, the tax reduction is equal to zero if you had a taxable income of 29,600 euros or more during the income year 2020.
Will withholding tax be deducted from these unemployment benefits and additional allowances?
These unemployment benefits and supplementary allowances are normally subject to withholding tax at the rate of 26,75 %. However, on 6 May, the Chamber of Finance Committee decided to withhold 15% withholding tax on these unemployment benefits and supplementary allowances until the end of the year. This withholding tax is deducted from the amount of the unemployment benefits and supplementary allowances. You will therefore receive the amount of unemployment benefits and supplementary allowances less withholding tax on earned income.
Is the withholding tax equal to the final tax?
No, the withholding tax is only an advance payment of the final income tax due and is set off against it. It is therefore not the case that the rate of the withholding tax on professional income is fully in line with the tax rate that will ultimately be applied to those allowances.
When can I gain insight into my tax situation for the income year 2020, assessment year 2021?
As soon as the personal income tax calculation programme is final (presumably in the course of spring 2021), you can perform a calculation for the income year 2020, assessment year 2021, via the Taxcalc application.
Last update: 07/05/2020