Tax plans of the new government coalition

In its coalition agreement, the traffic light coalition has laid down many planned changes in tax and social welfare law.

The first traffic light coalition at the federal level has come together and started work remarkably quietly and smoothly. In the coalition agreement, the three governing parties also agreed on a whole range of measures in tax and social legislation that are to be implemented over the next four years. Inevitably, the measures are only broadly outlined in many cases. Nevertheless, the coalition agreement gives a good first impression of the new tax regulations we can expect in the coming months and years. Here is an overview of the most important measures for which more concrete plans already exist:

• Minimum Wage: A key election campaign issue for the largest coalition partner was a significant increase in the minimum wage. The statutory minimum wage is therefore to rise to twelve euros per hour in a one-off adjustment, although no precise date has yet been set for this. This measure is likely to come in mid or late 2022. Following this, the independent Minimum Wage Commission will again decide on any further increases.

• Mini and midijobs: In the future, the mini-job limit will be based on a weekly working time of 10 hours at minimum wage conditions and will therefore increase with the increase in the minimum wage to 520 euros. Compliance with the applicable labor law for minijobs is to be monitored more closely and hurdles to taking up employment that is fully subject to compulsory insurance are to be removed. The midijob limit increases to 1,600 euros.

• Bureaucracy reduction: The traffic light coalition has set its sights on reducing bureaucracy and is planning a further bureaucracy relief law. The basic business data register, which has already been adopted, is to be implemented quickly and its funding secured. The coalition also wants to examine the extent to which it can reduce the cost of and through the purely electronic storage of receipts and business documents. The effort involved in A1 certificates for cross-border activities is also to be reduced by a European electronic real-time register.

  

• Climate Special Depreciation: There is to be a super depreciation for climate protection and digital assets, with which a cost share of assets acquired or produced in 2022 and 2023 that serve these purposes in a special way can be deducted from taxable profit.

• Loss Offset: The loss offset extended in the wake of the Corona pandemic is to be extended until the end of 2023 and the loss carryforward extended to the two immediately preceding assessment periods.

• Savings allowance: From 2023, the savers' lump-sum allowance is to rise to EUR 1,000 (EUR 2,000 in the case of joint tax assessment).

• Home Office Flat Rate: The home office allowance, which was previously set to expire at the end of 2021, is scheduled to be extended and evaluated through December 31, 2022, which bodes well for a possible further extension.

• Company car: The preferential treatment of plug-in hybrid vehicles for company car taxation will be more strongly geared to purely electric driving performance for newly registered vehicles. In future, hybrid vehicles will only be privileged at half the extraction value (0.5 % instead of 1 %) if the vehicle is operated in purely electric driving mode for more than 50 %. If the vehicle is not predominantly used in electric driving mode or the purely electric driving share is not proven, the standard taxation of the company car with the 1 % regulation applies. The minimum electric range that the car must meet to qualify for the benefit is to be 80 kilometers as early as August 1, 2023. After 2025, the flat-rate taxation for zero-emission vehicles is to increase from the current 0.25 % to 0.5 % of the gross list price.

• Tax classes: As part of improved digital interaction between taxpayers and the tax authorities, the combination of tax classes III and V is to be transferred to the factor procedure of tax class IV, which will then be simple and unbureaucratic to apply.

• Employee share ownership: Employee participation in business assets is to be made more attractive by, among other things, a further increase in the tax allowance.

• Education allowance: The education allowance is to rise again for the first time since 2001, from 924 euros to 1,200 euros.

• Pension taxation: The traffic light coalition wants to implement the requirements of the Federal Fiscal Court's ruling on the Retirement Income Act. In order to avoid double pension taxation, the full deduction of pension insurance contributions as special expenses is to be brought forward from 2025 to 2023. In addition, the taxable pension portion is to increase by only 0.5 % instead of 1 % per year from 2023. Full taxation of pensions will thus not be achieved until 2060.

• Household services: An allowance and voucher system and the possibility for accompanying tax-free employer subsidies are provided for the use of family and everyday support services. The allowances and the existing tax subsidy will be offset. The initial beneficiaries will be single parents, families with children and family members requiring care, and gradually all households.

• Nursing Professions: In addition to improved working conditions, employees in nursing professions are also to receive more money. To this end, a tax exemption for bonuses and an increase in the tax exemption of the care bonus to 3,000 euros are planned.

• Real estate purchase: The federal states are to be given options for more flexible structuring of the real estate transfer tax, for example in order to be able to introduce an allowance for the acquisition of owner-occupied housing. To counteract this, further tax loopholes for share deals are to be closed. In addition, illegal financing of real estate is to be curbed by providing proof of taxation for real estate buyers from abroad and by banning the purchase of real estate with cash.

• Donations in kind: Persisting tax hurdles for donations in kind to charitable organizations are to be removed by means of a legally secure, low-bureaucracy and simple regulation, thus preventing the destruction of goods. This also includes clarifying liability law issues In particular, food waste is to be reduced together with all stakeholders.

• Foundations & Associations: It should be made clear by law that non-profit organizations can engage in political activities within the scope of their tax-privileged purposes and can also occasionally take a position on day-to-day political issues without jeopardizing their non-profit status. In addition, manageable and standardized transparency obligations and rules on the disclosure of the donation structure and financing are to be introduced.

• Digital management: Digital processes are intended to make it easier for taxpayers to fulfill their tax obligations, such as through pre-filled tax returns (Easy Tax). The further digitization of the taxation process is intended to ensure that tax regulations can, in principle, also be implemented digitally. The goal is for the entire interaction between taxpayer and tax administration to be possible digitally.

• Tax arrangements: In addition to tax evasion, aggressive tax structuring is also to be pursued and prevented with the greatest possible consistency. To this end, the notification requirement already introduced for cross-border tax arrangements will also be extended to national tax arrangements by companies with a turnover of more than EUR 10 million.