Dear ladies and gentlemen, dear clients, dear friends,

The long-awaited Growth Opportunities Act was announced on 27 March 2024. After tough negotiations, the Bundesrat approved the Mediation Committee's compromise proposal on 22 March 2024. The "Act to Strengthen Growth Opportunities, Investment and Innovation as well as Tax Simplification and Fairness" - or "Growth Opportunities Act" for short - is intended to improve the liquidity situation of companies.

The most important points are summarised below:

Temporary reintroduction of declining balance depreciation - § 7 (2) Income Tax Act (hereinafter referred to as EStG)

For movable fixed assets acquired or manufactured after 31 March 2024 and before 1 January 2025, the declining balance method of depreciation has been reintroduced. The percentage rate to be applied may not exceed twice the straight-line annual depreciation and may not exceed 20%

Temporary introduction of declining balance depreciation for residential buildings - § 7 (5a) EStG

A declining balance depreciation of 5% is permitted for buildings used for residential purposes if construction begins after 30 September 2023 and before 1 October 2029. The declining balance depreciation can also be combined with the special depreciation for the construction of new rental flats.

Special depreciation for movable assets - § 7g (5) EStG

Companies that do not exceed the profit limit of EUR 200,000 in the year preceding the investment can in future claim special depreciation of up to 40% of the acquisition or production costs in the year of acquisition or production and in the four following years. This applies to purchases made after 31 December 2023.

Special depreciation for new rental flat construction - § 7b EStG

Special depreciation for the construction of new rental flats can be claimed if flats that do not exist are created through construction measures based on a building application submitted after 31 December 2022 and before 1 October 2029. In these cases, the acquisition or production costs may not exceed EUR 5,200 per square metre of living space. The assessment basis for special depreciation is a maximum of EUR 4,000 per square metre of living space. The special depreciation allowance of 5% per year for buildings that achieve Efficiency House Standard 40 (EH40) plus the sustainability seal QNG can also be claimed over a total period of four years.

Gifts - § 4 (5) EStG

From 2024, the exemption limit for gifts to business associates has been raised from EUR 35 to EUR 50 per year.

Special regulation for the private use of electric vehicles - § 6 (1) EStG

For zero-emission vehicles (purely electric vehicles, including fuel cell vehicles), only 25% of the acquisition costs must be recognised as the assessment basis for private use. This previously only applied to acquisition costs of up to EUR 60,000. This value will now be increased to EUR 70,000.

Extended loss carried forward - § 10d EStG

Currently, up to a base amount of EUR 1 million or EUR 2 million (for spouses), losses can be carried forward without restriction for each loss carried forward year. For the portion exceeding the base amount, the loss carried forward is limited to 60% of the total amount of income in the loss carried forward year. For the years 2024 to 2027, the loss carried forward is limited to 70% of the total amount of income in the loss carried forward year.

The extensions of the loss carried forward also apply to corporation tax.

Extended reduction in trade tax - § 9 no. 1 Trade Tax Act (GewStG)

In order to further promote the expansion of solar power generation and the operation of charging stations, the harmlessness limit for sales of solar power will increase from 10% to 20% in the extended reduction for real estate companies. This will apply from the 2023 tax period.

The harmlessness limit of 5% for income from the provision of operating equipment to tenants, payments from tenants for events (e.g. Christmas markets) and income for special services to tenants (e.g. operation of a swimming pool) remains unchanged. For the calculation of the percentage harmlessness limits, the income from the transfer of use of the entire property owned by the property or housing company must be taken into account.

Accounting obligation - § 141 Fiscal Code (AO)

From 1 January 2024, the amount limits for the accounting obligation of commercial entrepreneurs and farmers and foresters will be raised. Accordingly, books must be kept if total turnover is EUR 800,000 or profit is EUR 80,000.

Research allowance

In addition to the salary expenses of the employees involved in the research project, the depreciation of depreciable movable fixed assets that are necessary for the research project can now also be included in the assessment basis for the research allowance. Furthermore, 70% of the costs of contract research can now be included in the assessment basis for the research allowance. Contract research occurs when a company awards a research and development contract to a third party or several third parties in return for payment and the client specifically defines a particular task that the contractor must solve. In this case, the contractor must be based in a member state of the European Union or in another state to which the Agreement on the European Economic Area (EEA Agreement) applies. Furthermore, small and medium-sized enterprises (SMEs) can also apply for an increase in the research allowance from 25% to 35%.

Example:

Kind regards