The Federal Government’s Climate Action Program: What Changes Are There in Tax Law?

In the fight against climate change, our federal government has established a climate protection program. This comprehensive climate package aims to transform a wide range of climate-damaging sectors through policy guidance. Bans are largely avoided; instead, the government intends to create incentives for environmentally friendly choices. A key aspect of this is providing incentives for climate-friendly actions. At the same time, climate-damaging activities will become more expensive. Any incentives and surcharges will be implemented through tax adjustments. Taxpayers should therefore prepare for changes this year. The changes are outlined in the “Act on the Implementation of the 2030 Climate Protection Program in Tax Law.” In this article, as tax advisors in Düsseldorf
and Oberhausen
, we will explain the key changes.

Support for Energy-Efficient Building Renovations

Energy-efficient renovation measures are climate-friendly. Insulating walls and roofs, replacing windows or exterior doors, as well as replacing or installing a ventilation system and optimizing existing heating systems are measures that can significantly improve a building’s carbon footprint. The federal government wants as many homeowners as possible to opt for energy-efficient building renovations. Therefore, energy-efficient renovation measures on owner-occupied residential properties will be eligible for tax incentives for the period from January 1, 2020, to December 31, 2029.

The new regulation allows for a deduction of 20% of the expenses for the renovations mentioned above. The tax benefit is spread over three years: 7% may be claimed in the first and second years. In the third year, 6% is claimed. With a maximum subsidy of €40,000 per property, renovation measures totaling €200,000 are eligible for funding. The following renovation measures are eligible for funding:

• Thermal insulation of walls and roofs
• Replacement of windows or exterior doors
• Replacement or installation of a ventilation system
• Optimization of existing heating systems

For building owners, the new regulation can be quite attractive. To find out how much money you can save in your specific case, it makes sense to consult with a qualified tax advisor. Our team in Düsseldorf and Oberhausen is, of course, up to date on the latest regulations and will be happy to assist you with planning and implementing the subsidy.

CO2 tax makes gasoline and diesel more expensive

CO2 emissions are set to decrease. To encourage businesses and consumers to pay more attention to the carbon footprint of their daily decisions, a tax on emissions will be introduced. Starting in 2021, the price of CO2 will be set at €25 per ton. By 2025, the price will rise to €55. For consumers, the new tax will be particularly relevant when it comes to fuel. Diesel and gasoline will become about 7 to 8 cents more expensive starting in 2021. By 2025, we can expect a fuel price increase of between 15 and 20 cents.

Increase in the commuter allowance and mobility bonus

With the introduction of the CO2 tax, commuters in particular will be heavily burdened. To offset this, the commuter allowance and mobility bonus will be increased. To ease the burden on commuters, the distance allowance will be raised to 35 cents starting at the 21st kilometer. Low-income commuters who fall within the basic exemption amount may opt for a mobility bonus equal to 14% of the increased allowance. The increase is initially limited to the period from January 1, 2021, to December 31, 2026.

Air Travel Tax to Increase

A tax on air travel already exists. With the “Act Amending the Air Traffic Tax Act,” the tax on intra-European flights will increase. The regulation will take effect on February 1, 2020. From that date on, air passengers must expect the air travel tax to rise from €5.53 to €13.03. For medium-haul flights up to 6,000 kilometers, the tax will be €33.01. For long-haul flights, the tax is set to rise to €59.43.

Reduction of VAT on long-distance train tickets

The aim is to make flights less attractive with the increased tax. People are encouraged to take the train instead. To make the switch even more appealing, long-distance train tickets will become cheaper. This will be achieved through a reduction in the value-added tax. Starting in 2020, train tickets will be taxed at only 7% instead of 19%. The regulation is permanent and open-ended.

Increased property tax assessment rate for wind farms

In the future, municipalities will be able to set a separate property tax rate for special zones designated for wind turbines. This will promote wind farms and renewable energy. To compensate for the associated costs, municipalities will receive a share of the revenue. This regulation is also permanent.

Purchase incentive for electric cars increased and extended

Fuel for conventional cars is becoming more expensive. At the same time, environmentally friendly electric cars are to be promoted. The so-called environmental bonus for electric cars has been in place for some time. Now, the purchase incentive has been extended until 2025 and the subsidy amount increased.

• The purchase incentive for fully electric vehicles is being increased from €4,000 to €6,000, and for plug-in hybrids from €3,000 to €4,500, with a maximum net list price of €40,000.
• For vehicles with a net list price between €40,000 and a maximum of €65,000, the purchase incentive will be €5,000 for fully electric vehicles and €3,750 for plug-in hybrids.

The incentive is jointly funded by the federal government and the industry. The benefit is attractive not only for businesses but also for private individuals.

Tax Consulting for Current Tax Changes

Tax changes and new laws are enacted regularly, even independently of the climate package. As an entrepreneur or employee, it’s easy to lose track of these developments. That’s why it makes sense to have a tax advisor who is well-versed in the latest developments. As tax advisors in Düsseldorf and Oberhausen, we serve a wide variety of companies across all industries. Our team of qualified and dedicated tax advisors is happy to assist you with all tax-related questions. Simply contact us to schedule a consultation.