Federal Government Adopts Annual Tax Act 2019

On 31 July 2019, the Federal Government adopted the draft of an Act on the Further Tax Promotion of Electric Mobility and Amending Other Tax Provisions (Annual Tax Act 2019). Subject to approval by the Bundestag, the Annual Tax Act 2019 will enter into force on 1 January 2020. Below we present the most important measures from this government draft relating to income tax:

Job Ticket

Employer benefits for commuting between home and the workplace (even if they are not granted in addition to wages already owed) are to be taxed at a flat rate of 25% in future. Such flat-rate-taxed subsidies will no longer be offset against the commuter allowance (Entfernungspauschale).

Additional Meal Expenses

The flat-rate allowances for additional meal expenses on business trips or under a dual household arrangement are to be raised. An increase from EUR 24 to EUR 28 is planned for a 24-hour absence, and from EUR 12 to EUR 14 for arrival and departure days where the absence is at least 8 hours.

Electric Vehicles

For company car taxation regarding the private use of a business electric or hybrid electric vehicle, the halving of the tax base is to be extended. The extension is intended for vehicles purchased or leased up to and including 31 December 2030. The tax exemption for the benefit-in-kind granted by the employer for charging an electric or hybrid electric vehicle on company premises is likewise to be extended.

Bicycles

The tax exemption for the benefit-in-kind from the provision of a company (electric) bicycle is also to be extended until the end of 2030.

Electric Delivery Vehicles

In the year of acquisition, in addition to the depreciation under § 7 (1) EStG, a special depreciation of 50% of the acquisition costs is to be granted for new electric delivery vehicles. According to the draft, this applies to vehicles with a maximum total mass of 7.5 tonnes.

Professional Drivers

A new flat-rate allowance of EUR 8 per calendar day is to be introduced for employees whose professional activity takes place predominantly in motor vehicles. This flat-rate allowance may in future be claimed instead of the actual expenses. However, if the actual expenses are higher than the flat-rate allowance, the actual expenses may be claimed.

Continuing Education

Continuing education services provided by the employer are to be tax-free. This is also to apply to training that serves to improve the employee's employability (for example language courses or computer courses). However, such benefits must not have a predominantly rewarding character.

Employee Housing

In high-priced metropolitan areas, a valuation discount for employee housing is to be introduced. The assessment as a benefit-in-kind of a dwelling provided by the employer to the employee for personal residential use is to be waived. The condition is that the rent paid, including ancillary costs, amounts to at least two-thirds of the local market rent and a maximum of EUR 20 per square metre excluding ancillary costs.

Tax Identification Number

Employees who are only subject to limited tax liability in Germany are in future to be assigned a tax identification number. This is to be carried out by the tax office responsible for the employer's permanent establishment upon application by the employee.

Special Expenses

Health and long-term care insurance contributions for the taxpayer's own child that are economically borne by the parents are in future to be taken into account as special expenses by the parents.

Crowdlending

An adjustment of the capital gains tax deduction is planned. In future, the capital gains tax deduction is also to apply to interest resulting from a claim acquired via an internet service platform, such as crowdlending. In crowdlending, a large number of people grant a loan (crowd = group of people, lending = granting of credit). The borrowers then repay the loan with interest within the agreed term. The domestic operator of this internet service platform is to act as the paying agent.