Is Kurzarbeitergeld (short-time work benefit) taxable in Germany?

Kurzarbeitergeld is a government subsidy paid by the Bundesagentur für Arbeit (Federal Employment Agency) when companies reduce working hours instead of laying off employees. The benefit replaces 60% of lost net wages (67% for households with children). It is paid directly to the employer, who passes it on alongside the actual salary for hours worked.

Kurzarbeitergeld itself is not subject to income tax or social security contributions. However, it is subject to the Progressionsvorbehalt (progression clause). This works the same way as with Elterngeld: the Kurzarbeitergeld amount is added to your other income to calculate the applicable tax rate, then that rate is applied only to your taxable income. The result is a higher effective tax rate on your actual salary income.

Because of the Progressionsvorbehalt, employees who received Kurzarbeitergeld during the year are required to file a tax return, even if they would not otherwise need to. Many employees on Kurzarbeit were surprised by unexpected tax bills for this reason. The amount of Kurzarbeitergeld received is shown on the Lohnsteuerbescheinigung (wage tax certificate) from the employer and must be entered in the return. If you received Kurzarbeitergeld, file a return promptly to understand any additional tax owed.

This is general information only, not professional tax advice. Consult a qualified tax professional for your specific situation.