By Ninja-Antonia Reggelin, Berlin
Germany’s cabinet today passed a law implementing the tax measures relevant to business in the German coalition party’s stimulus package.
The German tax package reduces VAT rates from July 1, 2020, to December 31, 2020, from 19 percent to 16 percent and from 7 percent to 5 percent. It also expands taxpayers’ ability to take loss carrybacks.
The law passed today is substantially similar to a proposal floated by the German finance ministry earlier this month.
Unlike the earlier proposal, the law now also includes an increased factor for the trade tax from 3.8 to 4.0. Up to a locally applied assessment rate of 420 percent, entrepreneurs of tax transparent entities can thus be completely relieved of trade tax through the tax reduction.
The more generous rule for tax loss carrybacks for 2020 is extended to 2021.
Finally, extensions of the reinvestment period of Section 6b EStG income tax act and the period for the use of investment deduction amounts according to Section 7g EStG income tax act are introduced.
An optional right for tax transparent entities to be taxed as corporations as well as better options applying to the depreciation of digital assets, which had been agreed upon earlier, are still missing.
The next step is for the law to be considered by the German parliament and federal assembly in the coming two weeks.
It is expected to pass, at the latest, by June 30 so the VAT tax reduction can apply from July 1.
Ninja-Antonia Reggelin
Ninja-Antonia Reggelin is based in Berlin, where she is head of tax policy at a business association.
She previously worked at the OECD, contributing to the project that led to the publication of the BEPS Action Plan. Prior to that, she was with PwC Germany, where she focused on international tax structuring.
Ninja holds a Master’s degree (LL.M.) in International Trade Law from Bond University Australia and a Master’s degree (M.A.) in International Relations from the University of Kent Brussels School of International Studies.
Latest posts by Ninja-Antonia Reggelin (see all)
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