Germany

The war started by Russia in Ukraine resulting in an Energy Crisis and exasperating inflation remains a major topic in the current political discussion in Germany.

In order to tackle increasing inflation, various forms of tax relief have been introduced by the legislator and will become effective as of 1 January 2023. In this regard, adjustments of the income tax rates as well as changes of some lump sum regulations applicable on individuals have been introduced.

In addition to this the Finance Act 2022 (“Jahressteuergesetz 2022”) provides for the introduction of a temporary windfall tax (EU energy crisis solidarity contribution) implementing Chapter III of the Council Regulation (EU) 2022/1854 of 6 October 2022 on an emergency intervention to address high energy costs.

Within separate legislative procedures further measures from the Council Regulation (EU) 2022/1854 of 6 October 2022 have been implemented, namely the legislator has introduced a so-called “electricity and gas price cap” (“Gesetz zur Einführung einer Strompreisbremse und zur Änderung weiterer energierechtlicher Bestimmungen” and “Gesetz zur Einführung von Preisbremsen für leitungsgebundenes Erdgas und Wärme und zur Änderung weiterer Vorschriften”) which is intended to limit the respective prices on a specified quantity which is based on the consumption of the previous year and is applicable for private households and companies. The electricity price cap is combined with an absorption rule for surplus revenues above a technology specific cap.

Besides these developments a bill to implement DAC 7 (Council Directive (EU) 2021/514 of 22 March 2021 amending Directive 2011/16/EU on administrative cooperation in the field of taxation) and modernising tax procedural law will enter into force on 1 January 2023. Among other changes the taxpayer’s obligation to cooperate in the field of tax audits and transfer pricing have been tightened. Furthermore fines for non-compliance during a tax audit have been increased and will be applicable to tax audits starting or announced after 31 December 2024.

Moreover the legislative process to implement Directive (EU) 2021/2101 with regard to the disclosure of income information by certain companies and branches (so-called public country-by-country-reporting), as well as the legislative process to implement Directive (EU) 2019/2121 (so-called Transformation Directive) with regard to cross-border conversions, mergers and de-mergers have been initiated.