As of: February 29, 2024, 8:05 a.m
By: Lars-Eric Nievelstein
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For weeks now, the Growth Opportunities Act has been a source of hope for entire industries.
Now there is only one hurdle left in front of him.
What relief can companies and citizens benefit from?
Berlin – Across all sectors, associations and companies are calling for a reduction in bureaucracy and tax relief so that Germany as a business location does not slip further in international comparison.
There has been a debate in politics for months about which steps would help the economy.
Both Economics Minister Robert Habeck (Greens) and Finance Minister Christian Lindner (FDP) believe impulses are necessary.
Now the time has come: the Growth Opportunities Act is getting closer, albeit in a slimmed-down form.
We've taken a look at some of the key changes.
Tax relief through the Growth Opportunities Act
The “Law to Strengthen Growth Opportunities, Investments and Innovation as well as Tax Simplification and Tax Fairness”, which is simply called the Growth Opportunities Act on the Federal Government’s website to make it easier to handle, is intended to fundamentally improve the financial situation of companies in Germany.
In the long term, it should also ensure that companies can invest more and dare to innovate.
Robert Habeck (Federal Minister of Economics) behind the red light.
For weeks now, the Growth Opportunities Act has been a source of hope for entire industries.
Now there is only one hurdle left in front of him.
© IMAGO / Sven Simon
The current draft law includes numerous changes compared to the original government draft.
For example, the relief volume has shrunk from seven billion to 3.2 billion euros.
A core piece of the law is still missing: the climate protection investment bonus.
The Growth Opportunities Act brings these tax reliefs to pensions
However, the federal government is taking several steps when it comes to income tax to reduce the tax burden for pensioners.
This starts with two types of relief for pensioners.
First, the Growth Opportunities Act is intended to eliminate double taxation for pensioners.
This came about during the restructuring of the pension system;
In some cases, the tax-free pension inflow is lower than the taxed pension contributions.
This means that taxes may be due again in retirement on pension contributions that have already been taxed.
That is why the government has decided on a new taxation model in the Growth Opportunities Act.
If it comes into force, the tax share of new pensions would only increase retroactively from 2024 in 0.5 percent increments, not (as is currently the case) in 1 percent increments.
The pension payments of new pensioners would then be fully taxed for the first time from 2058.
The second relief can be found in the age relief amount.
This is an allowance that comes into effect if taxpayers have reached the age of 64 before the current assessment period.
The tax office calculates it automatically;
This is about a supplementary tax exemption for people whose retirement provision does not only consist of pensions or pensions.
For example in the context of rental.
The contribution should actually fall to zero by 2040, in increments of 0.8 percentage points.
The Growth Opportunities Act reduces this rate to 0.4 percentage points.
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Additional taxation due to the Growth Opportunities Act no longer applies
Another innovation in income tax: on profits from private sales, it should only be charged if the total profit achieved in the calendar year is less than 1,000 euros.
So far, without the Growth Opportunities Act, this exemption limit has been 600 euros.
Spouses who are assessed jointly for income tax and both generate capital gains each have a single exemption limit.
Unfortunately, the higher funding rate for tax incentives for energy-efficient renovation is no longer applicable.
This was originally provided for in the Growth Opportunities Act.
At the same time, however, the additional taxation on the so-called December aid from 2022 will also be eliminated.
Relief in housing construction
When it comes to housing construction, the government wants to use declining balance depreciation for buildings that either serve residential purposes and are manufactured by the taxpayer.
This is intended to strengthen the construction and real estate industry.
Originally, a degressive depreciation rate of six percent was planned, now it is five percent.
This depreciation is intended to compensate for the initially rapid loss in value of real estate.
“Anyone who starts construction within the next six years should be able to use the new AfA,” said Klara Geywitz (SPD), Federal Minister for Housing, Urban Development and Construction.
“The degressive depreciation for residential construction has the potential to significantly strengthen the construction and real estate industry.” Construction of a residential building must begin between October 1st, 2023 and September 30th, 2029 so that the builders can use the depreciation.
A similar regulation should apply to “movable assets”.
Companies must purchase or produce these after March 31, 2024 and before January 1, 2025.
Tax relief for electric vehicles
The Growth Opportunities Act is also intended to introduce a new special regulation for the private use of company e-cars.
In the future, only a quarter of the assessment basis (gross list price) and a quarter of the acquisition costs or comparable expenses should be recognized.
In short: There are fewer taxes for using electric company cars.
Only pure electric cars and fuel cell vehicles are affected.
The existing maximum amount for the electric car increases from 60,000 euros to 70,000 euros.
Originally there was an upper limit of 80,000 euros.
New framework conditions for e-invoicing and small businesses
In the case of sales tax, for example, tax exemptions for guardians ad litem and legal guardians should come into force.
Small businesses will also be exempt from submitting sales tax returns for the calendar year in the future.
This regulation will apply for the first time for the 2024 tax period.
Before the Mediation Committee's decision, it was the period 2023.
There is also an adjustment to the so-called e-invoice.
Their use should be mandatory for entrepreneurs to report sales in the B2B sector from 2025.
From this point on, companies must issue and submit electronic invoices in a structured format to be considered electronic invoices.
Otherwise, for example with paper invoices, they end up in the “other invoice” section.
Changes to inheritance tax
Section 7 of the Inheritance Tax Act provides that the increase in the value of shares in a corporation through the payment of donations to the company is considered a gift.
Previously, only “natural persons or foundations directly or indirectly involved in the company” were considered to be eligible; the Growth Opportunities Act also includes personally liable partners in a limited partnership on shares.
And finally, the Growth Opportunities Act also affects insurance companies.
If you pay an insurance sum or life annuity abroad before paying or securing the inheritance tax, you will be liable for the tax in the amount paid out.
The tax authority may only assert existing liability above the so-called non-application limit.
This was previously 600 euros, but the new law will increase it to 5,000 euros.
Outlook – Where does the Growth Opportunities Act stand?
The Growth Opportunities Act is making waves in German politics.
The government draft did not find a majority in the parliamentary process; later a mediation committee of the Bundestag and Bundesrat agreed on a recommendation for a resolution.
That was on February 21st.
The Bundestag accepted this recommendation on February 23rd.
In order to finally come into force, the Growth Opportunities Act still needs the approval of the Federal Council.
A corresponding meeting is scheduled to take place on March 22, 2024.
After that, the law either comes into force - or politicians have to make further adjustments so that the CDU/CSU Union parties, which had previously blocked the law, are also satisfied.
The important investment premium, which was intended to subsidize sustainable projects, had already fallen.