On 14 July 2023, the German Ministry of Finance (MoF) has released a draft bill known as the “Growth Opportunities Act.” If passed, this act would mark Germany’s most significant corporate tax reform since 2008. Key elements of the draft bill include the introduction of an investment premium of 15%, capped at EUR 30 million, for the years 2024-2027. This premium is open to investments in depreciable movable fixed assets, along with existing assets that contribute to energy savings and are part of an energy management system. The available R&D credit assessment basis will be raised from EUR 4 million to EUR 12 million, and the eligible costs for fees paid to independent contract research companies will increase from 60% to 70%. The bill extends the loss carry-back period from 2 years to 3 years and suspends restrictions on loss carry-forwards (60% above EUR 1 million) during the years 2024 to 2027. Additionally, the bill enhances check-the-box rules for partnerships, making them more beneficial and applicable to a broader range of partnerships. It also revises the taxation rules for retained partnership profits.
Furthermore, the draft bill tightens limitations on interest deductibility, eliminating the stand-alone clause and equity escape clause. It introduces a new limitation on the deductibility of interest payments between related parties, restricting amounts exceeding the legally prescribed maximum interest rate. Overall, the reform aims to foster economic growth, incentivize investments, and ensure a more balanced corporate tax landscape.
