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German Cabinet Approves COVID-19 Stimulus Package

Thursday, June 25, 2020

A EUR130bn (USD148bn) fiscal stimulus package with numerous tax measures, intended to help revive the German economy following the COVID-19 pandemic, was approved by the Federal Cabinet on June 12, 2020.

Salient tax proposals in the stimulus plan include:

  • A reduction in the standard rate of value-added tax from 19 to 16 percent for the period from July 1 to December 31, 2020. The reduced seven percent rate will also be cut, to five percent, during the same period.
  • Improved amortization rules for investment in movable assets such as machinery for the tax years 2020 and 2021.
  • An extension of the loss carryback rules, to allow taxpayers to carry back up to EUR5m in losses in 2020 and 2021 (up from EUR1m). For joint filers, the limit will be set at EUR10m.
  • An extension of the due date for import VAT payments to the 26th of the following month.
  • A modernization of the corporate tax law to, among other changes, provide partnerships with the option to be taxed as corporations.
  • A doubling of the maximum allowance for research and development expenditure to EUR1m per year for the period from 2020 to 2025.
  • Changes to the vehicle tax to reduce the tax for cars with lower CO2 emissions and increase it for those with higher emissions.

The stimulus package will need to be approved by parliament before these measures can be put in place.