Germany: Proposed changes to “register cases,” depreciation for residential buildings, VAT recording and reporting

A draft bill of the 2022 Annual Tax Act includes tax-related amendments

A draft bill of the 2022 Annual Tax Act includes tax-related amendments

The German Federal Ministry of Finance (BMF) published the draft bill of the 2022 Annual Tax Act (Jahressteuergesetz 2022 – JStG 2022) that includes the following tax-related amendments:

  • Changes to taxation of “register cases” (i.e., persons subject to limited tax liability that derive German income from the assignment of rights entered in a German public record or register). Under the draft bill, payments in relation to such register cases would no longer give rise to limited tax liability as from 1 January 2023. For payments between unrelated parties, the abolition of the limited tax liability would apply retroactively, i.e., for all open cases including payments before 1 January 2023. However, where the income is earned by a person resident in a non-cooperative tax jurisdiction within the meaning of the German Tax Haven Defense Act, the limited German tax liability for register cases would still apply. For prior coverage, read TaxNewsFlash. 
    • These proposed changes follow guidance prolonging the application of a simplified procedure for non-resident tax liability arising from transfers of rights in cases when the right is merely entered into a German public register. Read TaxNewsFlash
  • Increase in the straight-line depreciation rate for residential buildings completed after 31 December 2023 to 3%. Residential buildings completed after 31 December 1924 have so far been depreciated on a straight-line basis at 2%; for completion before 1 January 1925 at 2.5%. However, the current possibility to prove a shorter useful life of a building would be eliminated for assessment periods after 2022.
  • Special recording and reporting obligation for payment service providers for cross-border payments would be introduced in the value added tax (VAT) law effective 1 January 2024. The rule implements Council Directive (EU) 2020/284 (18 February 2020) and is intended to combat VAT fraud, particularly in the area of cross-border electronic commerce. The obligation applies to payment service providers that make more than 25 cross-border payments to the same payee per calendar quarter. Failure to comply with the obligation may result in a penalty of up to €5,000. 

The draft bill is subject to technical consultation and comment, and then must be adopted by the German Parliament (Bundestag) and Federal Council (Bundesrat). Significant changes can therefore still be made during the course of the legislative process, but the legislative process may be concluded this year. The Act would become effective the day after its promulgation.

Read an August 2022 report [PDF 1.2 MB] prepared by the KPMG member firm in Germany 


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