Germany

Following the collapse of the governing coalition in November 2024, the legislative process in the German parliament (Bundestag) became more difficult towards the end of the year 2024. Early elections are envisaged to take place on 23 February 2025. Against this background, it is not clear which legislative projects will still be implemented in this legislative period. This, inter alia, applies to the Act to Modernise and Reduce Bureaucracy in Energy and Electricity Taxes (Gesetz zur Modernisierung und zum Bürokratieabbau im Strom- und Energiesteuerrecht) and the Second Future Financing Act (Zweites Zukunftsfinanzierungsgesetz). 

Surprisingly, the former coalition partners agreed on 13 December 2024 to implement the Tax Reform Act (Steuerfortentwicklungsgesetz), which foresees certain minor adjustments to the income tax rate. On 19 December 2024, the Bundestag approved a ’lite‘ version of the Tax Reform Act. The controversially discussed reporting obligations for domestic tax arrangements are no longer included in the Act. Further, other changes to income tax rates were already implemented with the Act on the Tax Exemption of the Minimum Subsistence Level (Gesetz zur steuerlichen Freistellung des Existenzminimums) earlier in December 2024.

Additionally, an updated version of the Tax Haven Defence Ordinance was issued in December 2024 reflecting the recent European Union (EU) blacklist of non-cooperative jurisdictions for tax purposes. 

Furthermore, on 5 December 2024, the Federal Ministry of Finance published a discussion draft for a Minimum Tax Adjustment Act (Mindeststeueranpassungsgesetz). This Act aims to adjust German Pillar Two Rules and to implement the Organisation for Economic Co-operation and Development (OECD) Administrative Guidance of June 2024. The discussion draft also foresees changes in income taxation (e.g. the abolition of the royalty limitation rule).  

The legislative process for the so-called Finance Act 2024 (Jahressteuergesetz 2024). was finalized in December 2024. This Act implements changes to various areas of German tax law focusing on technical adjustments required by EU law and case law as well as follow-up amendments to previous legislative changes.  

The legislative process for the Bureaucracy Relief Act (Viertes Bürokratieentlastungsgesetz) was finalised in October 2024. Additionally, a so-called Multilateral Instrument (MLI) Implementation Act modifying nine German double taxation treaties (DTTs) according to the MLI passed through parliamentary procedures in June 2024.

Furthermore, at the beginning of the year, the legislative process for the Growth Opportunities Act (Wachstumschancengesetz) was finalised. Nevertheless, the broad tax incentives for investments in climate protection, which were included by the Bundestag in November 2023 in the first legislative resolution on the law, have now been removed. Among other things, the Act includes changes in 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.