Extended retroactive period for reorganisations due to coronavirus: Surprising risks for tax groups and profit transfer agreements

The coalition agreement contains only a few statements on tax issues. The plans in detail provide for

• Tax simplification has been defined as a permanent task. From the 2021 assessment period, a pre-filled tax return is to be introduced for all taxpayers.
• The solidarity surcharge is to be abolished from 2021, i.e. at the end of the legislative period. The CDU/CSU and SPD have decided in principle that higher incomes should not benefit from the abolition of the solidarity surcharge. The approximately 10 per cent highest incomes are to continue to be required to pay the solidarity surcharge. This is because the coalition agreement refers to an exemption limit and not a tax-free amount. A sliding scale has been agreed to prevent anyone who exceeds the threshold by just one euro from having to pay the full solidarity surcharge.
• Cold progression, i.e. the effect that more and more taxpayers slip into a higher progression bracket as a result of wage increases, is to be countered with a report on the development of cold progression every two years in order to adjust the income tax rate accordingly if necessary.
• A common European tax base and minimum rates for corporate taxes in the EU should be pursued.
• The flat-rate withholding tax on interest income is to be abolished with the establishment of the automatic exchange of information (see our blog). The automatic exchange of information is already in force. The first information was exchanged in 2017.
• For small and medium-sized companies engaged in research, a long-requested tax incentive is to be introduced, which will apply to personnel and contract costs for research and development.
• Tax bureaucracy, such as the monthly VAT return, is to be simplified for start-ups.
• Home ownership and residential construction are to be subsidised through tax, for example by introducing a special depreciation allowance that is limited until the end of 2021. In addition to straight-line depreciation, this is to amount to 5 per cent per year over four years. In addition, a child building allowance of €1,200 per child and per year is to be introduced, which will be paid over a period of ten years. The child building allowance is to be granted up to an income limit of 75,000 euros taxable household income per year and an additional 15,000 euros per child. The energy-efficient refurbishment of buildings is to be subsidised for tax purposes through a right to choose between a subsidy and a reduction in taxable income.
• The introduction of a financial transaction tax in the European context is still being pursued and therefore remains a goal of the German government.
• Child benefit and the child allowance will be increased.
• The administration of import sales tax is to be optimised. The Federal Central Tax Office and the customs administration are to be upgraded.
• To prevent VAT fraud, operators of online trading platforms are to be obliged to provide information about traders.

In addition, the coalition agreement lists measures that have already been adopted or those to which Germany is committed under international agreements.