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Legislative tax proposals of the ‘traffic light’ coalition

The parties in the ‘traffic light’ coalition (SPD, Greens and the FDP) presented their coalition agreement on 24.11.2021. This also contains numerous tax changes. In the following section we give an overview of the most important planned regulations.

Changes related to businesses

  • Review to determine if workable adjustments need to be made to the option model and the so-called taxation of retained profits (please note: our reports on the option model in this issue and in a previous article demonstrate that this is the case).
  • Extension of the extended loss offset (€10m instead of € 1m) until the end of 2023 and spreading of the loss carry-back to the two immediately preceding  tax  assessment periods.
  • ‘Super depreciation’ on investments in climate protection and digital capital assets that are made in 2022 and 2023.
  • Initiatives aimed at introducing global minimum taxation and constant updating of the list of tax havens.
  • Appropriate taxation of income flows out of Germany, while aiming to prevent both non-taxation as well as double taxation. 
  • Prevention of tax structures through the expansion of withholding tax rights, in particular, by making adjustments to double taxation agreements. 
  • Supplementing the ‘interest barrier’ by adding an ‘interest rate level barrier’.
  • Implementation of the OECD anti-tax avoidance rules for the international exchange of information on financial accounts (CRS and FATCA) and the expansion of the exchange of information. 
  • Extension of the disclosure obligations for tax arrangements (DAC 6) to the national tax arrangements of businesses with revenues of more than € 10m.
  • Modernisation and speeding up of tax audits, in particular, through improved interfaces, standardisation and the meaningful use of new technologies. Setting up a central organisational unit at the federal level to ensure that the tax administration is able to adapt to the digital transformation and to reduce tax bureaucracy.
  • Promotion of employee share ownership by, among other things, further increasing the tax allowance. 
  • Tax incentives and investment allowances for producing affordable housing with social restrictions.
  • Simplification of the process of making in-kind donations to non-profit organisations in order to prevent the destruction of such goods.
  • Introduction of a nationwide electronic reporting system that will be used for the preparation, verification and forwarding of invoices (so-called e-invoicing). The aims in this respect are the prevention of fraud as well as the modernisation and de-bureaucratisation of the interface between the administration and businesses. At the EU level, the coalition wants to advocate for a definitive VAT system (e.g., reverse charge). 
  • Further development of the import sales tax in order to achieve a level playing field for European competitors.
  • Strengthening of inclusion businesses by, among other things, formally enshrining tax privileges in VAT law. 
  • Implementation of the so-called plastic tax - allocation of the plastic charge to manufacturers and distributors. 

Measures relating to all taxpayers

  • Simplification of tax returns and digitalisation of the taxation procedure.
  • Tax relief for plug-in hybrid vehicles to focus more strongly on the purely electric mileage. In future, hybrid vehicles would be tax privileged only if the vehicle is propelled predominantly (more than 50%) in pure electric drive mode. 
  • Extension and, where necessary, revision of the tax regulations for employees with respect to working from home up to 31.12.2022.
  • Increase in the flat-rate saver’s allowance to € 1,000 or, in the case of a joint assessment, €2,000 as of 1.1.2023. 
  • Increase in the straight-line depreciation for new residential construction from 2% to 3%. 
  • Intensification of the fight against tax evasion and tax avoidance.
  • Prevention of double taxation of pensions. 
  • Enabling the flexible structuring of real estate transfer tax at the level of the Länder [Federal States] in order to facilitate the purchase of owner-occupied housing. 
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