Germany: Changes for entrepreneurs as a result of the German government’s fiscal package of 3 June 2020

On 3 June 2020, the German government announced a fiscal package. The aim is to help families, companies and local authorities to better manage the economic consequences emerging from the Covid-19 pandemic.

In the following article, the most important points for entrepreneurs are highlighted. A paper drafted by the Federal Government, which constitutes key issues, can be found here (in german).

1. reduction of the VAT rate from 19% to 16% and from 7% to 5%, temporarily from 1 July 2020 to 31 December 2020 (no. 1 key issues paper)
2. stabilization of social security contributions at a maximum of 40% by 2021 (no. 2 key issues paper)
3. postponing of the due date regarding the import VAT to the 26th of the following month (no. 4 key issues paper)
4. extension of the tax loss carryback for the years 2020 and 2021 to a maximum of EUR 5m (no. 5 key issues paper)
5. degressive depreciation for wear and tear (Abschreibung für Abnutzung, AfA) with a factor of 2.5 compared to the currently applicable AfA, and a maximum of 25% per year for moveable economic assets in the fiscal years 2020 and 2021 (no. 6 key issues paper)
6. modernization of corporate tax law: option model (Optionsmodell) for corporate tax for partnerships, increase of the reduction factor for income from commercial activities to four times of the trade tax base (Gewerbesteuermessbetrag) (no. 7 key issues paper)
7. improving opportunities for employees to participate in their companies, to exploit the potential of a well-regulated, modern and efficient capital market and strengthen Germany as a location for investment in future and growth companies (no. 8 key issues paper)
8. The debt relief procedure after insolvency is shortened to three years for natural persons. Introduction of a pre-insolvency restructuring process for companies (no. 9 key issues paper)
9. simplification of public procurement law: shortening of award deadlines in EU procurement procedures, adjustment of thresholds for restricted invitations to tender and direct awards in Germany (no. 11 key issues paper)
10. bridging aid for small and medium-sized companies, whose sales have fallen by at least 60% in April and May 2020 compared to April and May 2019 due to the Covid-19 pandemic, and whose sales declines continue to fall in June to August 2020 by at least 50% (no. 13 key issues paper)
11. research tax allowance is granted retroactively as of 1 January 2020 and limited until 31 December 2025 on an assessment basis of up to EUR 4m per company (no. 32 key issues paper)
12. co-financing obligations in application-oriented research are reduced (no. 33 key issues paper)
13. the purchase price limit for the taxation of purely electric company cars is increased from EUR 40,000 to  EUR 60,000 (no. 35 b key issues paper)
14. bonus programme for future investments by vehicle manufacturers and the supply industry for the years 2020 and 2021 (no. 35 c key issues paper)

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