Adjustments Initiated from 1st of January
The new year, 2023, marks the commencement of significant regulatory changes in Germany. These changes are aimed at social support, inflation relief, and tax adjustments, with a focus on improving the lives of citizens and relevant entities.
The changes include updates to the citizen's allowance (Bürgergeld), child benefit (Kindergeld), housing benefit (Wohngeld), price brakes, and tax measures.
- Citizen's allowance (Bürgergeld): The new system, replacing the previous Hartz IV system, comes with increased basic social security payments and a stronger emphasis on support and integration measures for long-term unemployed citizens. It provides roughly €502 monthly for single adults, with increased housing and heating benefit entitlements and a focus on individual care plans rather than strict sanctions.
- Child benefit (Kindergeld): As of 2023, child benefit increases to €250 per child per month, supporting families with additional allowances available for low-income families up to €250 more per month. This aims to ease the cost of raising children in a rising inflation environment.
- Housing benefit (Wohngeld): In response to sharply rising rents and energy costs, the housing benefit system was expanded and increased in 2023 to provide more generous support to low- and middle-income households. The adjustment includes higher income thresholds and increased flat-rate allowances for tenants and homeowners. As a result, housing benefit is doubled on average to 370 euros in 2023, and up to 2 million households can now benefit.
- Price brakes: To combat soaring energy prices, Germany implemented price brakes such as temporary fuel tax reductions and a €9 monthly public transport ticket to lower mobility costs. The EEG surcharge on electricity bills was abolished in 2023, expected to save a typical family around €300 annually. Additional government subsidies were introduced to support the replacement of gas boilers with heat pumps and to increase energy efficiency standards.
- Tax changes: Though specific tax rate changes effective January 2023 are not detailed, the government’s fiscal strategy includes relief measures such as tax cuts related to energy prices and increased allowances for commuters. Additionally, fiscal reforms accommodate special funds for infrastructure and climate transformation, relaxing debt rules to enable borrowing for these priorities.
These 2023 reforms collectively target improving social security adequacy, reducing the cost burden from inflation and energy prices, and facilitating a greener energy transition, while maintaining fiscal discipline through targeted public investment funds and moderate tax adjustments.
It's important to note that the price brakes for gas, electricity, and district heating will not be visible on accounts until March, but January and February will be adjusted retroactively. Additionally, previously 600,000 households could benefit from housing benefit, but with the expansion, up to 2 million households can now benefit.
The new regulations are scheduled to start on the first day of 2023 and are expected to impact the public or relevant entities significantly. The citizens' allowance replaces Hartz IV in stages, starting in 2023. The maximum amount of the child supplement also increases to €250 per child in 2023.
These changes represent a significant step forward in providing support to citizens and businesses in Germany, especially in the face of rising costs and inflation. Further details about these regulations will be provided in subsequent announcements.
The new regulations, effective from 2023, aim to enhance financial aid for citizens and relevant businesses by introducing improvements in several areas, such as the Citizen's Allowance (Bürgergeld), Child Benefit (Kindergeld), and Housing Benefit (Wohngeld).
These changes include an increase in child benefit to €250 per child per month and a focus on supporting low-income families, as well as a doubling of the average housing benefit to €370, benefiting up to 2 million households in response to rising rents and energy costs.
