Update on the Growth Opportunities Act: Federal Parliament Approves Compromise of the Mediation Committee

As part of the legislative process, the Federal Council (Bundesrat) convened the Mediation Committee at the end of November 2023.

For this reason, some regulations that were initially provided for in the Growth Opportunities Act (including the tightening of the interest barrier provisions) have been migrated to the Secondary Credit Market Promotion Act at short notice and came into force on January 1, 2024  (see our article dated December 18, 2023).

On February 21, 2024, the Mediation Committee reached a so-called non-genuine mediation result on the Growth Opportunities Act. Although the compromise received a majority of votes, representatives of the Christian Democratics/Christian Socialists did not agree. They made their agreement conditional on the planned abolition of subsidized agricultural diesel in another proposal being withdrawn. The Federal Parliament (Bundestag) approved the law, which was revised by the Mediation Committee, on February 23, 2024 (also with the votes of the government coalition).

A number of measures were removed from the initial draft bill, including, fortunately, the introduction of a notification requirement for domestic tax arrangements and the introduction of a climate protection investment premium. However, the initially contemplated extension of the loss carry-back pursuant to Section 10d (1) EStG-E has also been dropped.

Key Measures Adapted by the Mediation Committee

• The temporary increase in setoff possibilities within the minimum taxation with offsetting option of 70% (instead of 75% according to the Bundestag resolution of November 17, 2023) instead of 60% for four years for income and corporation tax (Section 10d EStG-E) is introduced. The corresponding provision for trade tax was deleted in the mediation procedure.
• The non-consideration of real estate and real estate companies for the purpose of determining the real estate partial exemption quota in case of no or insufficient taxation (Section 2 (9a) InvStG-E) and the other planned amendments to the InvStG are no longer to enter into force retroactively, but only upon adoption of the law.
• The temporary reintroduction of declining balance depreciation (AfA) has been slimmed down compared to the legislative resolution from November. It now provides for a declining balance depreciation of 20% and a maximum of two times the straight-line depreciation for movable fixed assets acquired or manufactured after March 31, 2024 and before January 1, 2025 (Section 7 (2) EStG-E).
• The new introduction of a declining balance depreciation for residential buildings was also adjusted (from 6% according to the Bundestag resolution of November 17, 2023) to 5% with the start of construction from October 1, 2023 for a limited period of six years (Section 7 (5a) EStG-E).

With regard to the other key planned measures, which remain part of the legislative process regardless of the mediation procedure, please also refer to our article dated December 18, 2023.

It remains unclear whether the required majority for the Growth Opportunities Act will be achieved in the Federal Council on March 22, 2024 with the votes of the federal states, led by the Christian Democratics/Christian Socialists. Numerous business associations have vehemently called for the bill to be passed.

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Other Articles in this Issue:

• Federal Government Expands Access to Capital for Startups
• AIFMD II - A Moderate Reform After More Than 10 Years of Application of the AIFMD
• Lack of Regulation on Book Value Transfer Between Partnerships with Identical Shareholdings Unconstitutional
• Federal Fiscal Court Confirms Previous Case Law on the Taxation of Management Participations