Draft of the 2022 Annual Tax Act is available

The federal government has passed the government draft for the Annual Tax Act 2022, which also implements parts of the new tax relief package.

After the Federal Ministry of Finance presented the draft bill for the Annual Tax Act 2022 in August, the revised government draft was published in September. In it, the federal government incorporated various measures from its third tax relief package and other additions. Like every annual tax law, the law is an omnibus law with a correspondingly large scope: the government draft comprises 178 pages - 36 pages more than the first draft law.

The Bundestag and Bundesrat are now to discuss the draft and adopt it by mid-December. German taxpayers will then be faced with numerous changes to tax law. These include adjustments to EU law and reactions to the case law of the Federal Constitutional Court and the Federal Fiscal Court. In addition to many such detailed changes, adjustments due to previous legislative amendments and corrections of errors, there are also a whole series of substantial changes. More than half of the estimated reduction in tax revenue as a result of the Act is attributable to just one change, namely the bringing forward of the full tax deductibility of pension contributions. Here is an overview of all the important changes brought about by the Annual Tax Act 2022:

• Home Office Flat Rate: The home office allowance of 5 euros per day, which is currently limited until the end of 2022, will remain in place permanently. In addition, the maximum deduction will be increased from 600 euros to 1,000 euros per year, which corresponds to 200 days of work from home per year. Anyone who carries out several home office activities must divide both the daily flat rate and the maximum amount between the various activities. It is therefore not permissible to apply the lump sum more than once. However, the deduction of the home office lump sum is possible regardless of whether the activity takes place in a work corner or in the home office and regardless of whether it is the center of professional activity or whether there is another workplace.

  

• Home office: Anyone who can claim a home office for tax purposes will also have to prepare for changes from 2023. If no other workspace is available, the previous maximum amount of €1,250 will be converted into an annual lump sum that is tax-deductible regardless of proof of actual costs. The annual lump sum is room-related and must therefore be divided up if the study is used for several activities by the same taxpayer or by several people in the same household. If the study is the center of the entire activity, the expenses can be claimed in full as business expenses or income-related expenses, as before. Taxpayers can choose between the annual flat rate and the actual costs. However, the costs of the study in such "central cases" are only tax deductible if no other workplace is permanently available for the activities carried out there. Otherwise, the only option is to apply the home office flat rate for the days on which work is carried out in the home office.

• Depreciation of buildings: The annual straight-line depreciation rate for buildings completed after June 30, 2023 that are used for residential purposes will be increased from 2 % to 3 % of the acquisition or production costs, thereby shortening the depreciation period from 50 to 33 years. At the same time, the exception rule will be abolished, according to which the depreciation period can be calculated according to an actually shorter useful life in justified exceptional cases. Due to the case law of the Federal Fiscal Court, there have been more and more applications for a shorter depreciation period. The general shortening is therefore intended to reduce bureaucracy. However, the exemption still applies to buildings for which depreciation was already applied before 2023 due to a shorter useful life. This means that all property owners who acquire an existing property in the coming year or whose building is completed after the turn of the year but before June 30, 2023 are out of luck.

• Photovoltaic systems I: From 2023, various tax and bureaucratic hurdles for the installation and operation of photovoltaic systems will be removed. To this end, an income tax exemption will be introduced for income from the operation of photovoltaic systems up to a gross nominal output of 30 kWp on single-family homes and commercial properties or 15 kWp per residential and commercial unit for multi-family homes, mixed-use properties and other buildings used primarily for residential purposes. In total, a maximum of 100 kWp per taxpayer or co-entrepreneur share is covered by the tax exemption. The tax exemption is independent of the use of the electricity generated. If a business only generates tax-free income from tax-privileged photovoltaic systems, it is no longer necessary to calculate a profit and therefore no longer submit an EÜR system. In the case of asset-managing partnerships, the operation of photovoltaic systems that do not exceed the preferential system sizes does not lead to a commercial infection of rental income. This means that in future, asset-managing partnerships will also be able to install photovoltaic systems of up to 15 kWp per unit (max. 100 kWp) on their rental properties and supply their tenants with self-generated electricity without having to fear tax disadvantages.

  

• Photovoltaic systems II: From 2023, VAT will no longer be charged on the supply and installation as well as the intra-Community acquisition and import of photovoltaic systems and electricity storage systems. This means that input tax deduction will no longer be a reason for waiving the small business regulation, as the supply of photovoltaic systems will no longer be subject to VAT anyway. In future, the small business regulation will therefore generally no longer be associated with financial disadvantages for operators of photovoltaic systems. As the installation is also subject to a zero tax rate, providers will not have to differentiate between supply and service elements in future. The prerequisite for the application of the zero tax rate to photovoltaic systems is that the system is installed on or in the vicinity of dwellings or buildings used for activities serving the common good. To simplify matters, this requirement is deemed to be met if the installed gross output of the photovoltaic system does not exceed 30 kWp. In the majority of cases, the regulation prevents the supplier from having to obtain information from the purchaser about the type of use of the building in order to apply the correct tax rate, while the supplier should generally be aware of the output of the system supplied.

• Valuation law: The Annual Tax Act 2022 makes numerous changes to the Valuation Act and, in particular, adapts the regulations for determining market value to the new Real Estate Valuation Ordinance (ImmoWertV). With the amendments to be applied from 2023, the income and asset value method for the valuation of developed properties and the procedures for valuation in leasehold cases and cases involving buildings on third-party land will be adapted to the amended ImmoWertV. This is intended to ensure that the other data required for the valuation determined by the expert committees can continue to be used appropriately in the valuation of real estate for the purposes of inheritance and gift tax and real estate transfer tax. In individual cases, the changes may result in significantly higher valuation rates for real estate. Anyone wishing to realize an anticipated succession at the old values must therefore have done so by the turn of the year. In addition, adjustments will be made to the case law of the Federal Fiscal Court and to the previous view of the tax authorities.

• Retirement benefits: The full deduction of special expenses for pension expenses, which was previously only planned for 2025, will be brought forward to 2023 due to the rulings of the Federal Fiscal Court on the double taxation of pensions. Full deductibility from 2023 means that deductible pension expenses will increase by 1TP3k in 2023 and by 1TP3k in 2024.

• Short-term employment: Not least due to the increase in the statutory minimum wage, the salary threshold for the flat-rate tax option for short-term employment will be raised from EUR 120 to EUR 150 per working day from 2023.

• Savings lump sum: As envisaged in the coalition agreement, the saver's lump sum will be increased from 801 to 1,000 euros for single taxpayers and from 1,602 to 2,000 euros for joint taxpayers from 2023. In order to keep the increase in the lump sum as simple as possible, exemptions already granted will automatically be increased by just under 25 %.

• Education allowance: The allowance for the special needs of an adult child in vocational training who is living away from home and is entitled to child benefit will be increased from EUR 924 to EUR 1,200 per calendar year from 2023.

• Basic pension supplement: The basic pension supplement is intended to recognize the lifetime achievements of people who have been compulsorily insured in the statutory pension insurance scheme for many years on a below-average income. This supplement is to be made tax-free retroactively from 2021.

• Top tax rate 2007: In order to implement the requirements of a ruling by the Federal Constitutional Court, the cap on the top tax rate of 42 % will be lifted retroactively for profit income from 2007. As a result, the "wealth tax" of 45 % also applies to the few outstanding assessment cases from 2007 for income from 250,000 euros (single assessment) or 500,000 euros (joint assessment).

• Public benefits: A legal basis is being created in the Fiscal Code to establish a direct payment channel for public benefits via the tax identification number. This is intended to create a low-bureaucracy and fraud-proof way of paying out public benefits such as climate money directly to citizens. To this end, a legal basis will be created for storing the account details (IBAN) of all citizens registered in Germany in the IdNr database. The IBAN stored in the IdNr database is subject to strict purpose limitation.