The Federal Cabinet adopted the government draft of an Annual Tax Act 2024 (JStG 2024) on June 5, 2024.
The government draft largely corresponds to the draft bill of May 17, 2024 and contains a large number of very different individual measures in various tax laws, of which we present an overview of selected changes below:
German Income Tax Act (Einkommensteuergesetz – EStG)
- Extension of the scope of application of Section 19a EStG to the transfer of shares in group companies within the meaning of Section 18 German Stock Corporation Act (Aktiengesetz – AktG; so-called group clause, Section 19a (1) sentence 3 EStG-draft). This provision was originally already provided for in the Future Financing Act (Zukunftsfinanzierungsgesetz), but was removed from the agenda. The supplementary group clause is to enter into force retroactively as of January 1, 2024.
- Implementation of the German Constitutional Court decision of November 28, 2023, 2 BvL 8/13 on book value transfers between partnerships with identical shareholdings (section 6 (5) sentence 3 no. 4 EStG-draft); for the constitutional court decision, see also our Legal Insights of March 14, 2024. The amendment should generally be applied in all open cases; at the joint request of the co-entrepreneurs, the new regulation may not be applied (Section 52 (12) EStG-draft) at the time of the transfers before January 12, 2024 (publication of the constitutional court decision).
- Revision of the regulations on the creation and reversal of the adjustment item (Ausgleichsposten) pursuant to Section 4g (1) sentence 4 EStG in the event of the disclosure of hidden reserves due to conversion as a result of the restriction or exclusion of the right of taxation.
German Corporate Income Tax Act (Körperschaftsteuergesetz – KStG)
- In future, an additional procedure to separately determine the amount of contributions not made to the nominal capital of the transferring corporation or association of persons will no longer be required (Section 27 (2) sentence 3 KStG-draft in conjunction with Section 29 (6) sentence 2 KStG-draft).
German Trade Tax Act (Gewerbesteuergesetz – GewStG)
- Amendment of Section 7 sentence 8 GewStG with the aim that all passive foreign permanent establishment income is deemed to have been generated in a domestic permanent establishment, including income for which Germany already has the right of taxation under a double tax agreement.
German Real Estate Transfer Tax Act (Grunderwerbsteuergesetz – GrEStG)
- Inclusion of a statutory rule on the allocation of properties for purposes of real estate transfer tax (Section 1 (4a) GrEStG-draft (new)). Contrary to recent case law and published administrative opinions (see Legal Insights of December 18, 2023), the realization of a taxable share deal pursuant to Section 1 para. 3 or para. 3a GrEStG should not lead to a change in the allocation of properties, so that no double allocation of the same property can take place. For the purposes of Section 1 (2a) to (3a) GrEStG, a property belongs exclusively to the company that last acquired the property on the basis of a taxable transaction pursuant to Section 1 (1) GrEStG (asset deal). According to the explanatory memorandum to the law, the regulation is not intended to apply to cases of abusive structuring.
German Investment Tax Act (Investmentsteuergesetz – InvStG)
- The winding-up period for investment funds is to be extended from five to 10 years (Section 17 (1) sentence 4 InvStG-draft).
- Expansion of distribution-equivalent income to include all capital gains that are also realized outside the one-year or 10-year period pursuant to Section 23 EStG, in particular gains from the sale of real estate and rights equivalent to real estate outside the ten-year holding period (Section 36 (3) sentence 3 InvStG-draft); in particular, currency forwards and capital gains from cryptocurrencies are still not to be included in distribution-equivalent income (Section 36 (3) sentence 3 InvStG-draft)
- In addition to the regulations in the JStG 2024, the BMF's draft law on the promotion of investments by funds in renewable energies and infrastructure should be mentioned. In particular, this provides for clarifications with regard to the tax classification of so-called active entrepreneurial management and further regulations for investments in renewable energies. It remains to be seen whether and in what form these changes will be implemented, for example whether they will be integrated into the JStG 2024.
German Reorganization Tax Act (Umwandlungssteuergesetz – UmwStG)
- Regulation on the electronic transmission of the final tax balance sheet within 14 months of the end of the tax period in which the transfer date for tax purposes falls (Section 3 (2a) UmwStG-draft)
- Book value recognition at shareholder level applies as a rule without application; recognition at fair market value only upon application (Section 13 (2) UmwStG-draft)
- Section 18 (3) sentence 3 UmwStG-draft (new) is to expressly regulate that the capital gain is also subject to trade tax in the event of an indirect sale or relinquishment of shares in the acquiring partnership
- Section 20 para. 2 sentence 5 UmwStG-draft is intended to clarify (contrary to the Federal Fiscal Court’s ruling of 07.03.2018, I R 12/16) that, in accordance with the existing administrative opinion on Section 20 para. 2 sentence 2 no. 2 UmwStG in conjunction with Section 20 para. 5 UmwStG, withdrawals and contributions in the retroactive period are to be taken into account when determining the contributed business assets
The government draft will now be forwarded to the German Federal Council (Bundesrat) for comment and then submitted to the German Federal Parliament (Bundestag). The legislative process is currently expected to be completed in the fourth quarter of 2024.
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