Annual Tax Act 2019 on the home stretch

After the Bundestag, the unofficial Annual Tax Act 2019 has also been passed by the Bundesrat.

Ever since the first draft version was published in the spring, the "Act on the Further Tax Promotion of Electromobility and the Amendment of Other Tax Regulations" has been treated as the unofficial annual tax law for 2019, as it bundles numerous changes to tax law, most of which will come into force from 2020. The Bundestag and Bundesrat passed the law in November, meaning it can now enter into force as planned.

Normally, such unofficial annual tax laws have the characteristic of increasing significantly in scope during the legislative process - the adopted version can easily contain twice as many amendments as the first draft. In this respect, the 2019 Annual Tax Act is out of the ordinary, as it has lost some amendments compared to the early drafts and at the same time only received a few additions.

The fact that the law has now been "slimmed down" is due to two circumstances: On the one hand, the end of the year brings with it a veritable marathon of tax amendment laws, as the Bundestag and Bundesrat passed no fewer than seven separate tax amendment laws in the fall. Some of the smaller changes that would otherwise have been part of the 2019 Annual Tax Act have been incorporated into the other laws, while larger changes have simply been given their own amendment act, such as the tax measures as part of the grand coalition's climate package.

On the other hand, there are changes that were originally included in the law, but where politicians now see a need for further consultation. There was therefore no choice but to remove these changes from the law so that the Annual Tax Act 2019 could be passed in time before the turn of the year. Compared to the draft that we presented in the summer, the following new amendments have now been added in particular:

• Electric service car: The halving of company car taxation for company cars with an electric or hybrid drive is now not only being extended, but also expanded. For company cars purchased between January 1, 2019 and December 31, 2030 that have no CO2 emissions and whose gross list price is less than 40,000 euros, taxation will now be reduced to a quarter instead of just half.

  

• Electric vehicles: The draft bill only provided for special depreciation for electric delivery vehicles. This special depreciation now applies to all electric commercial vehicles and electrically powered cargo bikes.

• Bicycles: In addition to an extension of the tax exemption for the private use of a company bicycle, there is now also the option of a flat rate of income tax on the free or discounted transfer of a company bicycle by the employer in addition to the wages already owed.

• Income tax registration: From 2022, the wage tax to be withheld and paid must be stated separately in the wage tax return according to the calendar years in which the wages are received or deemed to be received.

• Animal husbandry: It regulates when income from agricultural animal breeding or animal husbandry is included in agricultural and forestry income if it is generated by cooperatives, companies or associations.

• E-media: The application of the reduced VAT rate to e-books and other digital media now also applies to access to databases containing a large number of electronic books, newspapers or magazines. The reduced tax rate will apply from December 18, 2019.

• Menstrual products: The reduced VAT rate will also apply to "products for monthly hygiene purposes" from December 18, 2019.

• Capital gains: Employees who have received investment income without a tax deduction (final withholding tax) must now submit a tax return. There is no de minimis limit for this.

• Remuneration in kind: The first draft provided for a tightening of the rules for benefits in kind, which was removed from the law in the meantime but has been reinstated in the final version. As of 2020, earmarked cash benefits, subsequent cost reimbursements and other benefits that are denominated in a monetary amount are therefore generally not benefits in kind.

In the final version of the Annual Tax Act 2019, the following changes were deleted or, contrary to earlier plans, not included:

• Share deals: A key part of the first draft were changes to the real estate transfer tax, which were intended to curb share deals. As the governing coalition still needs to consult on this, this amendment is now to be given its own legislative procedure at the beginning of 2020.

• Alternative forms of housing: The draft included a tax exemption for benefits in kind in the context of alternative forms of housing. This amendment was deleted in the final version.

• Volunteer: The simplifications and improvements to tax charitable status proposed by the federal states have also not been included in the law. However, the Federal Council intends to stick to the plan so that these changes may be included in a later law.