The German legislator is currently introducing a large number of tax law changes in various draft bills. This article provides an overview of the most important planned changes.
ANNUAL TAX ACT 2024
The draft Annual Tax Act 2024 (JStG 2024) provides for the most extensive changes. These include, but are not limited to, the following:
Income Tax Act
- Implementation of the requirement of the Federal Constitutional Court, according to which the direct transfer of assets between partnerships with identical shareholdings must also be able to take place on a roll-over basis at book values (Section 6 (5) sentence 3 no. 4 (new) EStG)
- Income-reducing consideration of option writer premiums in connection with differences clearing settlements (Section 20 (1) no. 11 EStG)
Corporation Tax Act
- Implementation of an explicit statutory provision according to which, in the event of a reorganization, no separate assessment of the tax contribution account is required for newly formed corporations, but this is to be treated as an ongoing increase (section 27 (2) sentence 3 KStG)
- Statutory provisions on the treatment of deemed excess/reduced transfers in indirect tax group chains (section 27 (6) sentence 3 (new) KStG)
- In future, increases of the tax contribution account in the case of (inbound) cross-border mergers is to be recorded directly at the acquiring domestic corporation (section 29 (6) sentence 2 KStG)
Trade Tax Act
- New version of the regulation on the qualification of foreign income subject to addition as domestic permanent establishment income for trade tax purposes (Section 7 sentence 8 (new) GewStG)
Investment Tax Act
- Extension of German-source income by way of inclusion of income from the assignment of rent and leasehold interest claims (section 6 (4) sentence 1 no. 3 (new) InvStG)
- In future, the partial exemption tax regime for so-called equity, mixed and real estate funds shall also be possible if the fund documentation does not provide for thresholds, but it can be proven that these were actually complied with throughout the entire financial year (section 20 (4) and (4a) (new) InvStG)
Reorganization Tax Act
- Inclusion of a statutory provision according to which a step up in value must also be carried out if the acquisition costs would otherwise be negative due to withdrawals in the retroactive period (reaction to contrary case law of the BFH of March 7, 2018 - I R 12/16; Section 20 (2) sentence 5 (new) UmwStG)
Value Added Tax Act
- Inclusion of the management of loans and loan collateral in the catalog of value added tax (VAT) exempt services (Section 4 no. 8 UStG)
Real Estate Transfer Tax Act
- Clarification of the allocation of real estate. These changes provide legal clarity, as this was previously not regulated by law and, following BFH rulings from 2021 and 2022 and an identical state decree from October 2023 (see December 18, 2023 Legal Insights), there were considerable ambiguities and double taxation risks in some cases.
SECOND FUTURE FINANCING ACT
The draft of a second law on the financing of future-proof investments (Zweites Zukunftsfinanzierungsgesetz - ZuFinG II) provides, among other things, for the implementation of tax measures of the federal government's so-called growth initiative.
From a tax perspective, the draft bill provides, among other things, for a harmonization of the regulations on so-called other entrepreneurial German source income, according to which, for the purposes of the InvStG, domestic commercial income only exists in the case of actual commercial activity or active entrepreneurial management, but not in the case of so-called deemed or contaminated partnerships (section 6 (5), (5a) and (5b) (new) InvStG).
TAX DEVELOPMENT ACT
The draft bill on the further development of tax law and the adjustment of the income tax rate (Tax Development Act - SteFeG; formerly the Second Annual Tax Act 2024) provides for adjustments to the income tax rate as well as the implementation of mandates from the coalition agreement and measures from the federal government's growth initiative.
Particularly controversial is the renewed introduction of a reporting obligation for domestic tax arrangements (sections 138k et seq. (new) AO), which is also rejected by the independent expert commission "Simplified Corporate Tax" appointed by the Federal Ministry of Finance, among others.
ACT TO STRENGTHEN THE FUND MARKET
The draft bill to strengthen the German fund market and to implement Directive (EU) 2024/927 of the European Parliament and of the Council of March 13, 2024 amending Directives 2009/65/EC and 2011/61/EU with regard to delegation agreements, liquidity risk management, supervisory reporting, the provision of custody and depositary services, and lending by alternative investment funds (Fund Market Strengthening Act) provides in particular for amendments to the KAGB and consequential amendments.
MINIMUM TAXATION AMENDMENT ACT
Following the implementation of the second pillar as part of the Minimum Taxation Directive Implementation Act at the end of 2023 (see December 18, 2023 Legal Insights), the draft law to amend the Minimum Tax Act and other measures (Minimum Tax Amendment Act - MinStGAnpG) is intended in particular to clarify the application of the CbCR safe harbor in accordance with the new OECD administrative guidelines.
FOURTH BUREAUCRACY RELIEF ACT
The Fourth Act to Reduce Bureaucracy for Citizens, Business, and the Administration (Fourth Bureaucracy Reduction Act - BEG IV), which has already been approved by the German Federal Parliament, provides for changes to VAT, income, and investment tax law in addition to adjustments to stock corporation and employment law, but these are cosmetic at best with regard to the legislative objective.
In the course of the legislative procedure, there may still be changes to the plans and the points mentioned.
It also remains to be seen whether all laws can be passed by the end of the year as planned.
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