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German Federal Council approves the Economic Growth Acceleration Act


In Germany's latest coalition agreement, the new governing coalition announced comprehensive tax reliefs for companies particularly in the fields of income tax, corporation tax and real estate transfer tax already for year 2010. Luther, our German member discuss the significant changes for businesses in their latest newsletter.

The first step in these tax reliefs is now be implemented in the so-called Economic Growth Acceleration Act. The German Federal Council passed the Economic Growth Acceleration Act on 18 December 2009. Taxand Germany give their overview of significant changes of tax law according to the bill in their newsletter, in particular covering:

1. Loss deduction of corporations
2. Tax deductibility of interest expense (Interest Ceiling Rules = Zinsschranke)
3. Reduction of the add backs to the trade tax base in case of rental payments
4. Real estate transfer tax (RETT) relief in case of company reorganizations
5. Value Added Tax (VAT)

Taxand's Take

The amendments to the Economic Growth Acceleration Act indeed provides tax relief to companies and reduces tax barriers for restructuring measures. However, in some cases (e.g. escape clause within the interest ceiling rules, reduction of the trade tax add back for rental and lease payments) legislator significantly falls short behind the expectations raised by the coalition agreement, since the respective tax relief hardly has noticeable effects.

Your Taxand contact for further queries is:
Ulrich Seigmund
T. +49 6196 592 16364

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Taxand's Take Author