Germany: Compromise tax reform bill adopted by mediation committee of Parliament, other tax developments

The mediation committee of the lower and upper houses of the German Parliament (Bundestag and Bundesrat, respectively) on 21 February 2024 adopted a compromise proposal for the “Act to strengthen growth opportunities, investment and innovation as well as tax simplification and tax fairness.”

The mediation procedure was necessary because the Bundesrat had not approved the Act previously passed by the Bundestag on 24 November 2023.

The Bundesrat must not approve the Act with the amendments proposed by the mediation committee.

Read a March 2024 report [PDF 412 KB] prepared by the KPMG member firm in Germany that describes the significant tax amendments included in the Act.

Other recent tax developments in Germany include:

• Swap interest expenses are only subject to trade tax add-backs if the loan agreement and the swap transaction form an economic unit (Germany Federal Fiscal Court (BFH), decision III R 27/21).
• Shareholding threshold of 10% for application of the participation exemption can be achieved by means of an acquisition transaction that is economically uniform from the point of view of the acquirer, even if several sellers are involved in this transaction (BFH decision, I R 16/21).
• The German Federal Ministry of Finance (BMF) provided information on the current status of the income tax treaties and other tax agreements concluded between Germany and other countries and negotiations regarding the treaties.