Tuesday, December 31, 2019
The German Ministry of Finance has outlined a number of tax changes that are due to take effect in 2020 and 2021.
From January 1, 2020, the rate of value-added tax on rail fares will be seven percent, irrespective of the distance travelled. Currently, only rail fares for journeys of less than 50km qualify to be taxed at the seven percent reduced VAT rate, with the remainder taxed at 19 percent.
Also, under a regulation that has been in force since December 18, 2019, electronic and physical publications will be treated the same for VAT purposes. This means that electronic publications will be taxed at the seven percent reduced rate. However, this VAT reduction does not apply to publications that are used wholly or mostly for advertising purposes, as well as publications that consist entirely or mostly of video content or audible music.
In addition, the rate of VAT on feminine hygiene products will be reduced from 19 to seven percent from January 1, 2020.
A further temporary VAT change will allow new companies to submit VAT returns quarterly in their first year of operation during the period from 2021 to 2026. At present, newly founded companies must submit VAT returns monthly for the first 12 months.
January 1, 2020, will see the introduction of special depreciation rules for the purchase of electrically powered commercial vehicles and bicycles. Under this measure, taxpayers will able to depreciate 50 percent of the acquisition costs of these items in the year of purchase. This temporary measure will apply until December 31, 2030.
For the same period, the tax base for the private use of electric or externally charged hybrid company vehicles will be halved. This measure was due to expire at the end of 2021.
A tax deduction for work carried out to make residential buildings more energy efficient will also apply from January 1, 2020. This will be available for owner-occupied properties which are at least 10 years old, with the maximum spend set at EUR200,000 (USD223,430).
Research and development
A new research and development tax incentive will permit companies to claim an allowance equal to 25 percent of the tax base, subject to a EUR2m (USD2.2m) ceiling. This means that the allowance will be capped at EUR500,000 per assessment year. To qualify for the incentive, taxpayers must be engaged in basic research, industrial research or experimental development. Qualifying expenditure includes wage expenditure for research staff as well as contract costs for projects commissioned.
From 2020, the tax on flight tickets will increase as follows: intra-EU flights from EUR7.50 to EUR13.03; intermediate flights of between 2,500km and 6,000km from EUR23.43 to EUR33.01; and long-haul flights in excess of 6,000km from EUR42.18 to EUR59.43.
The EU's new directive on tax dispute resolution mechanisms will be implemented in Germany on January 1, 2020. The new rules aim at ensuring the quicker and more effective resolution of tax disputes between EU member states and at offering greater certainty to businesses and individuals experiencing double taxation issues.
Tax planning schemes
Germany will also introduce the EU law requiring intermediaries to report certain cross-border tax planning arrangements to the tax authorities on January 1, 2020. The sixth EU Directive on Administrative Cooperation (DAC 6), requires intermediaries – such as tax advisors, accountants, banks, and lawyers – to report relevant arrangements before they are used.