Due to the end of the so-called traffic light coalition and the upcoming new elections in Germany, numerous draft tax bills will not be adopted prior to the end of this legislative period. However, the Annual Tax Act 2024 was still able to be passed due to the advanced stage of deliberations at the time of the breakup of the coalition and has entered into force in essential parts. We provide an overview of the most relevant changes resulting from the Annual Tax Act and the status of the most important other legislative proposals.
Due to the breakup of the coalition between the Social Democrats, Greens, and Liberal Democrats and the upcoming new elections, most of the current tax legislation will no longer be adopted.
However, the Annual Tax Act 2024 (JStG 2024) was adopted and has come into force in essential parts.
The comprehensive JStG 2024 amends numerous tax laws. The main changes to corporate tax law are as follows:
The Tax Development Act (SteFeG) was also passed in a significantly slimmed-down version and has already come into force. In particular, it now includes adjustments to the income tax rate. Numerous original measures, some of which were part of the German government's growth initiative, have been removed from the plan, including the introduction of a notification requirement for domestic tax arrangements and the extension of the real estate transfer tax exemption for property transfers by and between partnerships. The continuation of declining balance depreciation and the expansion of tax incentives for research are also no longer part of the SteFeG.
The Act on the Tax Exemption of the Minimum Subsistence Income 2024 was also passed and came into force on January 1, 2024.
Although the Act to Strengthen the Fund Market has been submitted to the Federal Parliament, it has not yet been discussed. It will therefore not be adopted. In addition to the implementation of AIFMD II, the draft also contains the creation of the option to launch closed-end funds in the retail fund sector.
The Second Future Financing Act and the Act on the Reform of Tax-Subsidized Private Pension Provision are available as a government draft or draft bill and will thus not be adopted. Their content may be taken up again by a new federal government.
The DAC8 Implementation Act is also available as a draft bill, which contains in particular a new parent law (Crypto Asset Tax Transparency Act - KStTG) as well as amendments relating to recording, reporting, and due diligence obligations for providers of crypto services. The draft could serve as a template in a new legislative period and be adopted quickly. National implementation of the EU-DAC8 must take place by December 31, 2025.
The Minimum Tax Adjustment Act is still in the early stages of draft legislation, namely as a (now second) discussion draft. In particular, the draft provides for the implementation of Organisation for Economic Co-operation and Development (OECD) administrative guidelines with a focus on CbCR safe harbor regulations. Various "accompanying measures" have been added to the second draft. These include the abolition of the ban on the deduction of special business expenses for transactions with a foreign connection (Section 4i EStG), the abolition of the license barrier (Section 4j EStG), the abolition of add-back taxation for income of an investment nature (Section 13 AStG), the increase in the exemption thresholds for add-back taxation (Section 9 AStG), and the adjustment of the reduction amount in the case of consolidated tax groups (Section 11 AStG). In the light of the United States’ recently announced withdrawal from the global minimum tax agreement by decree, it remains to be seen how a new German government will deal with the project and what direction the European Union will take.
The Fourth Bureaucracy Relief Act was passed and promulgated in October 2024. In tax law, it provides, among other things, for shorter retention periods for accounting documents, digital tax assessments, and a central power of attorney database for tax consultants. In addition, the submission deadlines for declarations of assessment for special investment funds will be standardized and the documentation obligations pursuant to Section 90 (3) and (4) of the German Fiscal Code (AO) will be restructured.
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