Germany Adopted Bill Amending Corporate Taxation

Germany Adopted Bill Amending Corporate Taxation

Last month the German Federal Cabinet adopted a bill on the simplification of company taxation and the tax treatment of travel expenses.

The key issues covered by the bill are the following:

1) Fiscal unity regime.

The rules on fiscal unity are amended in view of EU law. Now the fiscal unity regime will be applicable also to companies incorporated under the laws of an EU Member State that have their place of effective management in Germany. Thus, an EU company with its place of effective management in Germany can function as a group company within a German fiscal unity regime and allocate its domestic taxable income to a controlling parent company.

A new requirement for the application of the fiscal unity rules is introduced: the shares held in a group company must be attributable to a German permanent establishment of the controlling parent company. An attribution in such case is possible only if the taxable income attributable to the permanent establishment can be taxed in Germany under an applicable tax treaty.

Materially wrong accounts of a group company cannot invalidate the fiscal unity anymore if there was no negligence involved and the errors were corrected in the accounts for the year in which the error was detected.

2) Losses.

The amount of loss that can be carried back is increased from current EUR 511,500 to EUR 1 mln, and from EUR 1,023,000 to EUR 2 mln in case of joint assessment.

3) Travel expenses.

Various simplification measures regarding the deductibility of travel expenses are introduced. A definition of the “principal” workplace and a two-tier scale for lump-sum deductions for work-related expenses for meals are provided with the bill.

Now the bill is waiting for approval by the Lower House of the German Parliament and the Federal Council.

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