Germany

Following the major political discussions within the German government on the federal budget towards the end of 2023, the German Federal Council (Bundesrat) refused to pass the main tax act of 2023, the so-called Growth Opportunities Act (Wachstumschancengesetz), which had been approved by the German Federal Parliament (Bundestag) in November 2023. Besides broad tax incentives for investments in climate protection, the draft Act envisaged changes to the treatment of net operating losses, the interest limitation rule, and real estate transfer tax. Additionally, it was intended to introduce a reporting obligation for domestic tax arrangements and new regulations restricting the deductibility of interest from cross-border financing relationships. A few of the intended changes (namely changes to the interest limitation rule and real estate transfer taxation) have now been introduced via the so-called Secondary Credit Market Promotion Act (Kreditzweitmarktförderungsgesetz), which passed the Bundestag and Bundesrat in December 2023. The Growth Opportunities Act will be further discussed in a mediation process between the Bundestag and Bundesrat.

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 respective rules from 1 January 2024 (for certain rules 1 January 2025) onwards.

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 includes changes to income tax and value-added tax (VAT) that will enter into force on 1 January 2024.