Germany’s Green Light for EUR 3.2 Billion Growth Opportunities Act to Support Business

Growth Opportunities Act to improve investment and innovation conditions

The measures foreseen in the revised EUR 3.2 billion tax relief package approved by the upper house will improve the framework conditions for investment and innovation in Germany. Adjustments to national and international tax law provisions will also increase the country’s attractiveness as an international business location. Electronic invoicing for business transactions will also be introduced from 2025 onward to reduce unnecessary bureaucracy. 

Expansion of tax incentives for research and development activities

The cost basis for R&D tax incentive calculation will be raised to EUR 10 million without any time limitation. The eligible share of costs for contract research will be increased from 60 percent to 70 percent. Small and medium-sized enterprises will benefit from a 10 percent increase to the available tax incentive level ­– taking it to 35 percent of qualifying expenses as opposed to the general rate of 25 percent.

Simplification of the tax system and reduction of bureaucracy

As well as tax relief measures, the act also contains important measures to simplify the tax system – thereby reducing costs for small and medium-sized enterprises. The introduction of mandatory e-invoicing for transactions between companies domiciled in Germany will help eliminate more than EUR 1.3 billion in red tape costs. Additional saving in the EUR 80 million region will also arise from the increase in the threshold for specific tax-payer book-keeping obligations. 

Tax loss carryover improvements

The tax loss carryover limit will be increased to 70 percent for sums in excess of EUR 1 million  for the assessment periods 2024 to 2027 applicable to income and corporation tax. Under existing provisions, the loss carryover for each loss carryover year has been limited to 60 percent of total income. 

Temporary accelerated depreciation policy

The new legislation also introduces a temporary accelerated depreciation method – according to the declining balance method – for moveable assets acquired or made between April and December 2024. The applicable depreciation factor can be up to twice as high – capped at 20 percent annually – as the current straight line depreciation rate implementation. This means that companies are able to enjoy a higher rate of depreciation in the first years’ use of assets, leading to higher deductible expenses rates.