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Overview of changes for 2022

Even without a major annual tax law last year, there were again some changes in tax law at the turn of the year.

The vast majority of changes in tax and social security law come into force at the turn of each year. Accordingly, the list of changes in the new year is usually extensive. However, because the federal election was coming up last fall and the German government is already very busy managing the Corona crisis, there was no annual tax law last year, which usually bundles the majority of these changes.

Of course, this does not mean that nothing has changed at the turn of the year, because many amending laws from previous years also contain regulations that will not come into force until 2022. In addition, there are special regulations due to the Corona crisis that expired at the turn of the year or have yet to be extended. And finally, the new coalition government has also forged many plans, some of which are to come into force as early as this year, even if there is no corresponding tax amendment law yet. Here, therefore, is the annual overview of the most important changes at the turn of the year:

  • Basic allowance: The basic allowance (tax-free subsistence minimum) will increase by 240 euros in 2022 from the previous 9,744 euros to the current 9,984 euros. The maximum amount for the deduction of maintenance payments will also be increased by 240 euros to 9,984 euros.

  • Cold progression: To ensure that wage increases also reach employees' wallets, the effect of "cold progression" is now offset annually. To this end, the key figures of the income tax rate are shifted by the inflation rate of the previous year - i.e. by 1.17 % for 2022. The top tax rate of 42 % will therefore apply in 2022 to taxable income of 58,597 euros or more.

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  • Minimum Wage: The statutory minimum wage, which was originally to be adjusted only every two years, will instead rise in 2021 and 2022 in half-yearly steps according to the will of the Minimum Wage Commission. Following the last increase on July 1, 2021 to 9.60 euros, the third stage of the increase came into force at the turn of the year: Since January 1, 2022, the minimum wage has been 9.82 euros, and a fourth increase to 10.45 euros is planned for July 1, 2022. However, the traffic light coalition has agreed on an increase of the minimum wage to 12.00 euros, which according to the will of the Minister of Labor should come "still this year". But whether this means that the increase on July 1, 2022 will be significantly higher, that a third increase will be implemented this year, or that only the legal basis will be created this year, which will not take effect until the coming year, is still completely open.

  • Apprentice minimum wage: The regular minimum wage does not apply to apprentices. Instead, since 2020 there has been a minimum remuneration for apprentices to be paid in companies not bound by collective agreements. From 2022, this minimum remuneration will increase by 35 euros and will now amount to 585 euros per month. In the later apprenticeship years, the minimum pay increases by 18 % (690.30 euros per month) in the 2nd apprenticeship year, 35 % (789.75 euros per month) in the 3rd and 40 % (819.00 euros per month) in the 4th apprenticeship year.

  • Minijobs: As of January 1, 2022, the tax identification number must also be reported to the Minijob-Zentrale for all commercial minijobbers as part of the annual remuneration report, i.e. for the first time in the annual report now due for 2021. This applies regardless of whether the employer pays the tax to the Minijob-Zentrale on a flat-rate basis or carries out individual taxation according to the wage tax class. In addition, the employer's tax number and the type of taxation (individual or lump-sum) must be specified in the data transmission. The change only applies to marginally employed persons in a normal mini-job, but not to short-term employment relationships. In the budget check procedure, the Minijob-Zentrale only asks for the tax ID in cases where, exceptionally, no flat-rate tax is paid.

  • Non-cash benefit exemption limit: The limit for tax-free benefits in kind was raised from 44 to 50 euros per month as of January 1, 2022. However, the principle of the non-monetary remuneration exemption limit does not change: the value is a monthly value and may not be extrapolated to an annual exemption limit of 600 euros. Moreover, a non-cash benefit is fully taxable even if the exemption limit is slightly exceeded, because it is an exemption limit and not an allowance.

  • Remuneration in kind: In the past, there have been repeated disputes with the tax authorities about the distinction between cash and non-cash remuneration. Because case law has changed several times, there has been a statutory definition of non-cash remuneration since 2020, which is intended to provide greater clarity in the long term and at the same time prevent certain remuneration optimization models. Cash wages that are generally taxable now include earmarked cash benefits, subsequent cost reimbursements, cash surrogates and other benefits that are denominated in a monetary amount, as well as insurance contributions and other future security benefits for the employee or persons close to the employee. Vouchers continue to be regarded as non-cash benefits only if the issuer is identical with the company whose goods or services can be purchased with them. Another requirement is that the vouchers are granted in addition to the wages owed anyway and are not issued as part of deferred compensation. Certain benefits (credit cards, etc.) are therefore no longer remuneration in kind. However, the tax authorities had granted a transitional period during which the old criteria for vouchers could still be applied until the end of 2021. From 2022, the stricter definition will now apply without exception. The change not only affects the monthly non-monetary remuneration exemption limit of now 50 euros, but also the flat-rate income tax on non-monetary benefits.

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  • Home Office Flat Rate: A lump sum of 5 euros per day can be claimed for work at home. The lump sum is only granted for days on which the work is performed exclusively at home. Unlike the deduction of income-related expenses for the home office, there are no further eligibility requirements for this lump sum. The lump sum is limited to a maximum amount of 600 euros per year and, at least for the time being, only applied for the years 2020 and 2021. However, the traffic light coalition wants to extend and evaluate the lump sum until December 31, 2022, which gives hope for an extension beyond 2022.

  • Electric company car: In order to qualify for the company car tax benefit, plug-in hybrid vehicles must have a certain minimum range using only the electric drive. This minimum range depends on the date of purchase and initial registration and was 40 kilometers until the end of 2021. Since January 1, 2022, a minimum range of 60 kilometers now applies. According to current legislation, this value will continue to apply until the end of 2024 and then increase to 80 kilometers. However, the traffic light coalition has agreed to raise the minimum range to 80 kilometers as early as August 1, 2023, even though the law has not yet been amended to this effect.

  • Depreciation: As part of the Corona stimulus package, instead of straight-line depreciation, declining-balance depreciation of up to 25 %, but no more than two-and-a-half times straight-line depreciation, was also possible for movable fixed assets acquired or manufactured in 2020 and 2021. However, the option of declining-balance depreciation expired as planned at the turn of the year, so that only straight-line depreciation is possible again for assets acquired or manufactured in 2022.

  • Climate Special Depreciation: According to the coalition agreement, there is to be a super depreciation for climate protection and digital assets, with which a cost share of assets acquired or manufactured in 2022 and 2023 that serve these purposes in a special way can be additionally deducted. However, the details of this special depreciation allowance have yet to be worked out by the governing coalition.

  • Property Tax Reform: In 2018, the Federal Constitutional Court ruled that the previous real estate tax was unconstitutional and ordered the legislature to create a new regulation that conforms to the constitution, which will then be applied from 2025. The Constitutional Court granted this long transitional period because all real estate must be revalued for the real estate tax reform, which involves a corresponding amount of work for the tax authorities, but also for taxpayers. This revaluation alone takes three years, which is why the property tax reform came into force on January 1, 2022. The regulations differ from state to state because the federal government and the states were unable to agree on a uniform national model. What all property tax models have in common, however, is that all property owners will be required to submit declarations of assessment for their properties in spring 2022. These declarations of assessment can probably be submitted from July 1, 2022, and must be transmitted electronically to the tax office. As things stand at present, the submission deadline is October 31, 2022.

  • Flat-rate farmers: The average VAT rate for simplified taxation of flat-rate agricultural and forestry businesses will fall from 10.7 to 9.5 % from 2022. According to estimates by the German government, this will result in additional burdens for the affected farms of 80 million euros in 2022 and 95 million euros from 2023. The old average rate of 10.7 % would no longer be permissible from the new year because it would violate the EU directive on the common VAT system. Therefore, the average rate will continue to be adjusted automatically on an annual basis.

  • A1 certificate: Employers have been required to apply for the A1 certificate for their employees exclusively electronically from the health insurance fund since 2019. From 2022, self-employed persons will also be obliged to apply electronically for the A1 certificate if they work for a limited period across borders within the EU or in Iceland, Liechtenstein, Norway, Switzerland or the United Kingdom. The application is to be made via the portal sv.net to be made. Paper applications are no longer permitted.

  • Corporate tax option: From 2022, commercial partnerships and partnership companies will be able to be taxed in the same way as a corporation. However, the application required for the option must be submitted before the beginning of the fiscal year from which taxation under the Corporate Income Tax Act is to take place and must then be irrevocable for this fiscal year. For the year 2022, this deadline expired on November 30, 2021. A later return to income tax is possible in the same way. For tax purposes, the option is deemed to be a conversion into a corporation, thus triggering the corresponding conversion tax consequences, even if no actual change of legal form takes place. The tax treatment of remuneration paid to shareholders also changes. For example, remuneration for activities paid to a shareholder becomes wages, which are subject to wage tax deduction.

  • Organizations: In the case of the consolidated tax group, the adjustment items for excess and short transfers will be replaced from 2022 by a simpler system (so-called contribution solution), in which short transfers lead to a contribution by the tax group parent and excess transfers to a return of contributions.

  • Conversions: Reorganization tax law will be further globalized from 2022 onwards by extending the personal scope of application. Now, in addition to mergers, demergers and changes of legal form of corporations with reference to third countries will also be possible in a tax-neutral manner in order to carry out operationally sensible restructuring measures in a tax-neutral manner.

  • Exchange rate fluctuations: Exchange rate losses on shareholder loans will be exempt from the prohibition on deducting exchange rate losses from 2022. As a result, gains and losses from exchange rate fluctuations now have the same effect when determining taxable income.

  • Used car dealership: If a car dealer takes a used car in payment when selling a vehicle and the buyer makes an additional payment in the amount of the difference, the value of the used car is part of the consideration for the sold vehicle for VAT purposes. In this context, the charging of a price above the market value for the used car was previously considered a hidden price reduction, which reduced the consideration and thus also the sales tax to be paid. However, the Federal Fiscal Court has contradicted this, which is why the Federal Ministry of Finance has changed the regulation - albeit with a transitional period until the end of 2021. Since January 1, 2022, the subjective value of the used car, i.e. the value at which the car is offset against the agreed purchase price, must now be used without exception for the remuneration component of the used car. Consequently, hidden discounts will no longer be deducted when calculating VAT. The same changes apply to the supply of replacement parts and trade-in of old parts.


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