Federal Government Approves Draft of the Growth Opportunities Act 

On August 30, 2023, the German federal government passed the draft of the "Act to Strengthen Growth Opportunities, Investment, and Innovation, and to Simplify and Ensure Fairness in the Tax System (Growth Opportunities Act)." This law introduces a series of measures aimed at strengthening Germany’s competitiveness as a business location, modernizing and simplifying tax law, and improving tax fairness. As tax advisors in Düsseldorf and Oberhausen, we will explain what the draft law entails in detail:

Measures to Strengthen Competitiveness

Several important steps are planned under this section of the law:

• Investment bonus for climate protection: Germany is taking a step further in the fight against climate change by introducing an investment bonus that encourages companies to invest in environmentally friendly technologies and projects.
• Declining-balance depreciation for movable assets: Declining-balance depreciation for movable assets is being reintroduced to promote investment.
• Declining-balance depreciation for residential buildings: A time-limited declining-balance depreciation for residential buildings is intended to create incentives for housing construction.
• Tax incentives for research: Tax incentives for research will be strengthened and expanded to support innovation in Germany.
• Improvements to tax loss carryforward: In the future, companies will find it easier to claim tax losses.
• Immediate depreciation of low-value assets: Improvements are being made to the immediate depreciation of low-value assets.
• Special depreciation under Section 7g of the Income Tax Act (EStG): This provision is also being improved to promote investment.
• Changes to the retained earnings tax benefit and the option for corporate taxation: The law introduces changes to the retained earnings tax benefit and allows companies to choose between income tax and corporate tax.

Measures related to the modernization and simplification of tax law

The modernization and simplification of tax law are the focus of these measures:

• Raising the thresholds for bookkeeping and record-keeping requirements: Certain taxpayers will be exempted from bookkeeping requirements, and the record-keeping requirement for surplus income will be adjusted.
• Exemption of small business owners from VAT reporting obligations: Small business owners are to be exempted from VAT reporting obligations.
• Electronic data transmission in the Riester procedure: The law enables electronic data transmission in the Riester procedure to reduce bureaucratic hurdles.
• Digitization of the donation process: The register of donation recipients will be updated to facilitate the digitization of the donation process.
• Increase in the exemption threshold for withholding tax: The exemption threshold for withholding tax is being raised.
• Adjustment of pension taxation and increase in the exemption threshold: The taxation of pensions from the basic pension scheme is adjusted, and the exemption threshold for insurance companies and asset custodians regarding inheritance tax is increased.

Measures to improve tax fairness

The Federal Government is also focusing on measures to improve tax fairness:

• Reporting of cross-border tax arrangements: The obligation to report cross-border tax arrangements is being extended to domestic tax arrangements.
• Prevention of tax planning involving investment funds: The law aims to prevent tax planning involving investment funds.
• Introduction of mandatory electronic invoicing: A legal provision requiring the use of electronic invoices will be introduced.
• Adjustment of the interest deduction limit and introduction of an interest cap: The interest deduction limit is being adjusted, and an interest cap is being introduced to prevent tax planning.

The "Growth Opportunities Act" thus promises a comprehensive modernization and simplification of tax law, the strengthening of the German economy’s competitiveness, and improved tax fairness.

If you would like to know what tax implications the new law has for your business and how you can benefit from the new regulations, please schedule an appointment with us. Our team is happy to assist you with all tax-related matters. With our offices in Düsseldorf and Oberhausen, we offer you direct points of contact. Contact us to schedule a consultation. We look forward to meeting you.