The uncertainty among artists and self-employed persons was great when it was suddenly said that the Corona emergency aid may only be used for business expenses. Too many exceptions and too little clarification not only led to frustration for many, but initially even increased existential fears. The same questions were raised over and over again:
- What counts as business expenses for artists and what does not?
- How does it behave with personnel costs and own salaries?
- May reserves be formed?
Carsten Brehmer is a tax consultant from Berlin and provides information on the subject of operating expenses for artists and Corona emergency aid.
We spoke with Berlin tax consultant Carsten Brehmer to shed some light on the issue. Our main concern is to show to what extent the regulation of Corona emergency aid on operating expenses for artists can also be seen as a real opportunity.
But first a promise: No bureaucratic gobbledygook awaits you in this article! Our aim is to provide as simple an overview and overview as possible. All information is without guarantee. We always recommend an individual consultation. By the way, legal and tax consultancy costs also fall under business expenses – the keyword to lead over to the topic.
Corona-Soforthilfe: This counts as operating expenses for artists
"All material and financial expenses are considered as operating expenses, which flow off. It does not matter when the operating expenses were incurred, but when they are paid. In the case of the emergency aid program, expenses within the three consecutive months following the submission of the application are always considered. In the FAQs on the federal emergency aid program (Emergency Aid Corona) as of 21.04.2020 is with reference to number 5.1 of the application form stated that the month of application does not count. To my knowledge, this note is under item 5.1 of the current application form are no longer included, so it can be assumed that the three-month period is to be calculated exactly from the date of application," says Carsten Brehmer. To break down the terminology, the Berlin tax advisor gives us some specific examples of material and financial expenses. The following list is not exhaustive, but is intended to list the most important and common examples:
- Rent of the business premises
- Business insurance costs
- Interest and repayment (except unscheduled repayment)
- Goods and supplies required
- Current costs for company vehicles (these must already exist)
- Office supplies (z. B. Paper, folders, printer ink, pens, etc.)
- Software fees (z. B. Accounting programs, online tools etc.)
- Website and domain costs
- Franchise fees
- Further training measures
- Technical literature
- Consulting costs for tax or legal advisors
- Leasing rates
- Input tax amounts from invoices from other companies
- Advertising costs
"New" business acquisition of assets (z. B. Laptop, microphone etc.) are generally not to be considered in the calculation of the liquidity gap. Because new acquisitions are taken into account through depreciation and amortization does not represent a cash outflow. However, if the purchases are financed by loans, these can be included in the liquidity squeeze to the extent that they fall within the three-month period. Beyond that personnel costs, own salaries and private costs, as for example the rent for private dwelling or food, do not count to the expenditures, which may be financed with the emergency assistance , supplement Carsten Brehmer.
It is important to note that the calculated operating expenses for the grant period must be within an economically comprehensible range. For example, it would be noticeable if an artist suddenly ordered five times the usual amount of goods and materials within the subsidized months. By the way, reserves may not be formed from the emergency aid. Any subsidies must be used for business expenses within the three-month period. Still, there are a few ways to use financial aid to your advantage to positively impact operational liquidity, even as you look ahead to the remainder of 2020.
Bring forward planned expenses
Carsten Brehmer recommends taking a close look at the planned income and expenses for the entire year 2020 in order to allocate them in terms of operational solvency. For example, anyone who has already planned to spend money on promotional activities at the end of the year (z. B. Print ads, online advertising entries, …) in hand, may consider bringing this investment forward to the subsidized period. "At that moment, not only the advertising costs, but also the VAT amounts paid on them are operating expenses, which may be financed with the Corona emergency aid," says the tax consultant, "Conversely, the VAT collected counts as part of the profit of the business in the case of an income."According to Carsten Brehmer, it is therefore an option worth considering to pay or pre-finance all planned operating expenses within the subsidized three months and generate any income outside these three months. In the context it advises artists and self-employed persons to submit also an upcoming value added tax advance return at the tax office if possible in such a way that it favors the situation.
Set up a documentation
"It is advisable for the applicant to prepare detailed documentation on the expected income and expenses for the upcoming three months for which they are applying for emergency aid," says Carsten Brehmer. This documentation not only serves as a forecast for the required amount of subsidies, but can also be requested in case of doubt during an inspection by the state audit offices, the Federal Audit Office or even the Federal Ministry of Economics. Because the money from the Corona emergency aid must be declared and taxed in the tax return for 2020.
Seize the documentation as an opportunity
The documentation of planned income and expenses also brings an enormous advantage: clarity about the financial set-up of the operation. Many artists and self-employed people are no longer aware of their expenses in detail over the years. Here a magazine subscription, there an unused app – even small amounts add up neatly. "The documentation for the application is currently the chance to finally get an overview again and to question all expenses. Which are necessary, which are unnecessary? Now is the perfect time to optimize your business model. In this context, it is also exciting to know that the Federal Ministry of Economy and Energy has expanded its funding programs with regard to the Corona crisis. Many consultancies are currently paid up to 100%, but a maximum of 4.000 euros, are subsidized," explains Carsten Brehmer.
Contributions to the artists' social insurance fund
Artists who are insured through the Kunstlersozialkasse (artists' social insurance fund) can receive payment relief or. Apply for payment deferrals if there are payment difficulties due to the Corona virus. The deferral application for contributions is informal and possible in writing by e-mail to the Kunstlersozialkasse. It is important to clearly justify the circumstances of the payment difficulties. In addition, the Kunstlersozialkasse makes it possible to adjust the estimated annual income. Even if current expected income in 2020 is below the annual minimum rate of 3 due to the Corona Crisis, you can still plan ahead.900 € falls, the insurance coverage for the artist is not lost until further notice. (Source and further information on the website of the Kunstlersozialkasse )
Additional tips for severely threatened livelihoods
In addition to a well thought-out income-expense calculation, tax consultant Carsten Brehmer has a few more helpful tips in store that can help severely threatened existences survive the crisis.
- Until the end of the year (31.12.2020), the tax office grants an interest-free deferral on tax payments due. This means: Can the artist or. Self-employed persons do not currently have any money to spend on a tax payment, the outstanding tax amount can be deferred without interest, provided that the financial circumstances are explained. The interest-free deferral must be applied for at the responsible tax office.
- Likewise, artists and self-employed persons can apply by the end of the year (31.12.2020) apply for a reduction of the advance tax payments.
- Artists and self-employed persons who expect a significant loss for 2020 can have this carried back to 2019 on application. This loss carryback from 2020 can be determined as a flat rate of 15% of the relevant 2019 profit or, alternatively, based on detailed documentation, which can then also lead to a higher loss carryback.
If there is not yet a tax assessment notice for 2019, the reduction of advance tax payments for 2019 can still be applied for until 31.03.Apply in 2021. If the advance payments for 2019 were reduced due to the loss carryback from 2020, the tax assessments for 2019 always initially result in an additional payment due to the absence of the actual loss carryback from 2020. This can only be done when the tax assessments for 2020 are issued. The back payments for 2019, which are due to the lack of actual loss carryback from 2020, can be deferred without interest upon request until one month after the tax assessment notice for 2020 has been issued.
Apply for Corona emergency aid – deadline on 31. May 2020
Finally, we have some key background information on the requirements for those artists and self-employed who are in danger of losing their livelihood and who have not yet applied for Corona emergency assistance. Full-time artists and solo self-employed people nationwide can receive up to 9.apply for € 000. These financial grants are intended to help in the event of involuntary (imminent) liquidity shortages in order to avoid insolvency and bankruptcies. For this reason, artists and self-employed persons must be able to prove economic difficulties triggered by the Corona crisis. The decisive factor here is not just the pure loss of revenue, but the overall situation in terms of operational solvency. "It is still possible to apply for emergency aid until 31. May 2020 possible. The three-month period for financial support for operating expenses always begins in the month following the application," says tax consultant Carsten Brehmer.
Conclusion: A well thought-out planning offers chances
For most was and is the shock about the regimentation of the emergency aid on operating expenses for artists and self-employed persons large. But looking ahead is important! Because it will continue again. Be active now to prepare well for the time after the crisis. For example, through consultations or early planned training and advertising measures that help to positively influence the income situation in the coming months.
We thank Carsten Brehmer very much for the informative discussion!