Corporate - Significant developments

Last reviewed - 23 December 2023

After a tough mediation process between the German Federal Parliament (Bundestag) and the German Federal Council (Bundesrat) in March 2024 the legislative process for the main tax act of 2023, the so-called Growth Opportunities Act (“Wachstumschancengesetz”), was at last finalised. However, the broad tax incentives for investments in climate protection which were part of the first draft law introduced by the Bundestag in November 2023 have been removed from the final statute. Among other things the Act includes changes to the treatment of net operating losses, a temporary reintroduction of extended depreciation rates for movable assets and new regulations restricting the deductibility of interest from cross-border financing relationships The amendments to the interest limitation rule and real estate transfer taxation were transferred into the so-called Secondary Credit Market Promotion Act (“Kreditzweitmarktförderungsgesetz”), which was passed by the Bundestag and Bundesrat back in December 2023.

Another major change was the finalisation in December 2023 of the legislative process to implement Directive (EU) 2022/2523 on ensuring a global minimum level of taxation (Pillar Two) (Mindestbesteuerungsrichtlinie-Umsetzungsgesetz). The national legislation closely follows the Organisation for Economic Co-operation and Development (OECD) Model Rules and the European Union (EU) Directive and provides for an application of the so-called Income Inclusion Rule and Qualified Domestic Top-Up Tax for the first time for financial years beginning after 30 December 2023. The regulations on the Undertaxed Profits Rule apply to financial years beginning on or after 30 December 2024.

In addition in November 2023, the legislative process for the Act on the Financing of Investments to Secure the Future (Zukunftsfinanzierungsgesetz) was finalised. In addition to adjustments to financial market law and the further development of company law, the Act also included changes to income tax and value-added tax (VAT) which entered into force on 1 January 2024.