On 22 March 2024, the German upper house of parliament (Bundesrat) declared its endorsement of the Growth Opportunities Act. The lower house of parliament (Bundestag) gave its approval to the Act on 23 February 2024. The bill, initially proposed as the most significant corporate tax reform since 2008, has now been reduced to a minor stimulus package.
Key highlights of the Growth Opportunities Act include:
- Interest deduction limitation: Introduction of stringent interest deduction limitation rules for cross-border intercompany financing, subject to comprehensive tests ensuring transparency and fairness.
- Temporary loss carry forward: Temporary increase in the allowed offset of loss carry forwards for individual and corporate income tax purposes, providing relief in the period from 2024 to 2027.
- Increased R&D allowance: Expansion of the maximum annual qualifying expenses for the R&D tax allowance, along with increased provisions for contract R&D expenses.
- Improved depreciation: Depreciation on movable fixed assets will follow a declining balance method for assets acquired or manufactured between 31 March 2024 and 1 January 2025. This depreciation can reach a maximum of twice the straight-line method but capped at 20%.
- Clarifying Tax-Neutral Demerger Rules: Amendments to tax-neutral demerger transaction rules, aiming for clarity and equity in corporate restructuring.
- Compulsory Electronic Invoicing: Introduction of mandatory electronic invoicing from 1 January 2025, with transition periods for different business segments.
The legislation will take effect upon its publication in the Federal Law Gazette, anticipated to occur shortly.
