The 2024 Annual Tax Act: Key Changes and Decisions

On November 22, 2024, the Bundesrat approved the Annual Tax Act of 2024. The Act had previously been passed by the German Bundestag on October 18, 2024. During the legislative process, several changes were made to the original government draft, particularly regarding the Value-Added Tax Act (UStG). Here is an overview of the most important amendments:

What has changed?

Tax exemption for educational services

The planned comprehensive revision of Section 4 No. 21 of the VAT Act was not implemented, as it would have created uncertainty in the education sector. Instead, the existing regulation was only moderately adjusted to comply with EU requirements:

• Services provided by public educational institutions that directly serve school and educational purposes are now tax-exempt.
• An originally planned restriction stipulating that continuing education services are only tax-exempt if no profit is sought has been removed.
• The existing certification procedure remains in place, and the scope of tax-exempt services has been expanded to include “school and university instruction, vocational training, continuing education, and retraining.”
• A new provision is that school and university instruction provided by private tutors is also tax-exempt.

Input tax deduction for actual taxpayers

An important change concerns input tax deduction: In the future, this will only be possible if an invoice is available and the service has been paid for. However, the introduction of this rule has been postponed until 2026 to give businesses more time to adjust.

Agricultural and Forestry Businesses

The calculation of value-added tax for agricultural and forestry businesses (Section 24(5) of the Value-Added Tax Act) has been reformed. In the future, the Federal Ministry of Finance (BMF) will be able to set changes to the flat rate by statutory order—prior reporting to the Bundestag is no longer required.

Which proposals were dropped?

Some ideas from the government draft were not included in the final law:

• Credit management: An extension of the tax exemption to the management of loans by lenders was not implemented, as the financial impact would be too high given the strained budgetary situation.
• Sports services: The planned tax exemption for certain services in the sports sector was rejected due to a lack of readiness for implementation.

Conclusion

The Annual Tax Act 2024 introduces important changes, particularly in the area of sales tax. However, some of the originally planned changes were removed or postponed. The adjustments are intended to provide greater clarity, especially in the education sector.

At Trimborn . Partner, the tax consulting firm in Düsseldorf and Oberhausen, we advise small business owners and medium-sized companies on all key tax matters. Please feel free to contact us for a no-obligation consultation.