Background
Shortly before the end of the current legislative period, the federal government's legislative processes are in full swing. Only recently, the long-awaited real estate transfer tax reform was implemented.
As of May 28, 2021, two further important legislative procedures were passed by the Bundesrat (upper house of the German parliament), the Fondsstandortgesetz (FoStoG) and the Abzugsteuerentlastungsmodernisierungsgesetz (AbzStEntModG), which we already reported on in the draft stage. The following is a brief update on the final versions of the laws.
Fund Location Act
The Fund Location Act is intended to implement important regulatory and tax measures to strengthen the fund location. From a tax perspective, the focus is on making employee stock option programs more attractive. Compared with previous drafts, the version of the law that has been passed contains:
- An explicit clarification that investments held indirectly via partnerships also fall within the scope of the new deferral rule (Section 19a EStG);
- An extension of the maximum duration of tax deferral from ten to twelve years;
- An extension of the scope of application of Sec. 19a EStG to companies whose formation dates back a maximum of twelve (instead of ten) years;
- A further increase of the tax allowance of § 3 No. 39 EStG for the granting of property interests at a discount to € 1,440 (currently € 360, increase originally to € 720)
The trade tax relief provided for by the Fund Location Act when claiming the extended trade tax reduction has remained unchanged in the further legislative process.
The planned amendments to the Income Tax Act will come into force on July 1, 2021, while the trade tax amendments will come into force on the day following the promulgation of the Act.
Withholding Tax Relief Modernization Act
The background to the AbzStEntModG is in particular intended changes in the area of capital gains tax, which are related to the cum-ex, cum-cum and cum-fake scandals.
Tax changes in the area of transfer pricing and relief from withholding taxes (in particular Section 50d (3) EStG) are also part of the package of measures. However, the amendments to the law envisaged in this respect correspond in essential parts to the draft version. It is worth mentioning in this respect that exemption certificates are now to continue to take effect at the earliest from the date on which the application is received by the Federal Central Tax Office. This is in line with the current legal situation; however, the AbzStEntModG originally provided for a postponement to the date on which the exemption certificate is issued.
The changes ordered by the AbzStEntModG in the area of transfer pricing are to be applied for the first time for income and corporation tax for the 2022 assessment period. Changes with regard to Sec. 50d (3) EStG, on the other hand, are to take effect immediately and apply to all cases still open, unless the taxpayer would have obtained withholding tax relief by applying the old version.