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German Government Submits 2020 Budget

Friday, September 13, 2019

On September 10, 2019, German Finance Minister Olaf Scholz presented to the lower house of parliament, the Bundestag, the Government's draft Budget for 2020, which includes tax reduction measures.

Adopted by the federal Cabinet on June 26, 2019, the draft Budget includes proposals to substantially reduce the scope of the solidarity tax, so that around 90 percent of individual taxpayers will no longer be liable to pay the levy.

Used to help fund economic development in the east of Germany, the solidarity tax is a 5.5 percent surtax on both corporate and individual income.

In addition, the Budget includes proposed new incentives for spending on research and development activities which were agreed by the Cabinet on May 22, 2019. According to the Government's previous announcement on these proposals, the main points of the draft research and development law include an allowance equal to 25 percent of the tax base, which is subject to a EUR2m (USD2.2m) ceiling. This means that the allowance will be capped at EUR500,000 per assessment year.

In his Budget presentation speech, Scholz also made numerous references to the need for stricter anti-tax avoidance rules, and confirmed that Germany will implement the European Union directive on mandatory reporting of tax planning schemes by intermediaries.

Scholz also reiterated his support for a corporate minimum tax to be adopted at international level.