Annual Tax Act 2022

• The share of the pension from the statutory pension insurance that is paid on the basis of the supplement in earning points for long-term insurance under the Sixth Social Code (so-called basic pension supplement) will still be tax-exempt for the 2021 assessment period. To the extent that corrected pension benefit notifications are required for this purpose, income tax assessments that have already become final can still be amended.
• Contributions to compulsory state pension insurance systems and the like will be 100 % deductible as special expenses from the 2023 assessment period onwards. The amendment brings forward to 2023 the full deduction of special expenses previously planned from 2025.
• In the area of the so-called “Riester” pension subsidy, procedural simplifications are planned for the application for the child allowance as of January 1, 2023.

Against the background of the accelerated expansion of renewable energies, retroactively as of January 1, 2022, an income tax exemption for income from the operation of certain photovoltaic systems takes effect on, at or in

• detached single-family houses (including outbuildings) or non-residential buildings with an installed gross capacity of up to 30 kW (peak) and
• other buildings with an installed gross capacity of up to 15 kW (peak) per residential or commercial unit.

The tax exemption applies to the operation of several systems up to a maximum of 100 kW (peak). The 100 kW (peak) limit is to be checked per taxpayer or per joint venture.

According to the explanatory memorandum to the law, the tax exemption applies regardless of the use of the electricity generated. This means that income from photovoltaic systems in which the electricity generated is fed entirely into the public grid, consumed to charge an e-car used for private or business purposes, or used by tenants is also tax-exempt.

In the case of asset-managing partnerships, the operation of photovoltaic systems that do not exceed the favored system sizes does not lead to a commercial infection of rental income.

Beginning with the 2023 assessment period, either the actual expenses can be recognized as business expenses or income-related expenses for a home office, or an annual lump sum of EUR 1,260 can be recognized if the office forms the center of the entire business or professional activity. It is now irrelevant whether another workplace is available for this purpose. The annual lump sum is a person-specific amount that is to be granted on a per month basis.

The home office lump sum, which is to be granted as a daily lump sum, shall apply if the activity is only carried out on a daily basis in the home. The lump sum of previously EUR 5 per calendar day on which the business or professional activity is carried out in the home will be permanently discontinued as of the 2023 assessment period, increased to EUR 6 per day and raised in total from currently EUR 600 to EUR 1,260 (maximum amount).

When determining profits by means of a comparative analysis of operating assets, so-called accruals and deferrals must be formed. This means that expenditure and revenue are allocated to the fiscal year to which they economically belong.

For fiscal years ending after December 31, 2021, the recognition of accruals and deferrals can be omitted if the respective expense or income does not exceed the amount of a low-value asset in the amount of EUR 800 net. The option must be exercised uniformly for all expenses and income.

The straight-line depreciation rate for residential buildings to be completed after December 31, 2022, will be increased from the previous 2 % to 3 %. The deletion of the possibility of depreciation in accordance with a justified actually shorter useful life, which was still planned in the government draft, was not implemented.

In addition, a special depreciation allowance can be applied to the construction of new, previously non-existent apartments if the construction measures are based on a building application submitted in the years 2023 to 2026. A further prerequisite is that the classification of a so-called “Effizienzhaus 40” is proven. The acquisition/production costs may not exceed an amount of EUR 4,800/m²; a maximum of EUR 2,500/m² can be taken into account as the assessment basis for the special depreciation. In all other respects, the principles of the de minimis regulation are to be observed.

A statutory regulation on the possibility of offsetting losses attributable to more than one spouse will be introduced as of the 2022 assessment period. As of January 1, 2023, the personal savings allowance will be raised from EUR 801 to EUR 1,000 or from EUR 1,602 to EUR 2,000 in the case of joint tax assessment. In order to facilitate technical implementation, exemption orders that have already been issued will be automatically adjusted on a percentage basis. It is also clarified that, as of January 1, 2023, any interest from receivables acquired via an internet service platform will also constitute capital gains. 

The granting and leasing or sale of rights entered in a domestic public register or book is no longer subject to taxation, on the one hand, in the case of so-called third-party licenses, i.e. in the case of transactions between non-related parties within the meaning of § 1 (2) of the German Foreign Transaction Tax Act (Außensteuergesetz, AStG), in all open cases and, on the other hand, in the case of transactions with double taxation agreement (DTA) protection as of January 1, 2023. However, if the remuneration creditor is domiciled in a non-cooperative tax jurisdiction, taxation will take place in accordance with a new provision in the German Tax Havens Defense Act (Steueroasen-Abwehrgesetz). 

All benefits designated in the Natural Gas/Heat Emergency Relief Act will be subject to taxation as of the date of promulgation of the Annual Tax Act 2022. If they are not already directly attributable to a type of income, they will be statutorily classified as other benefits. In this case, however, taxation only comes into effect if a solidarity surcharge is to be assessed. A so-called mitigation zone also ensures that blatant jumps in the tax burden are avoided in the entry area of taxation.

• Employee lump-sum payment: increase as of January 1, 2023, to EUR 1,230
• Relief amount for single parents: increase as of January 1, 2023, to EUR 4,260
• Allowance for the out-of-town accommodation of a child in vocational training who is entitled to receive a child benefit and has reached the age of legal maturity: increase as of January 1, 2023, to EUR 1,200
• Lump-sum energy allowance: The lump-sum energy allowance for recipients of utilities is subject to income and wage tax; it is taxed at the individual tax rate. It is also clarified that the lump sum energy allowance is unseizable for all recipients.
• Long-term care bonus: For services provided by a fully and partially inpatient care facility as defined in § 150c of the German Social Code (SGB XI), the benefit period is extended until May 31, 2023.
• Flat-rate wage tax for part-time and marginally employed persons: increase in the wage limit for short-term employment (= occasional and non-regular recurring employment with a maximum of 18 consecutive working days) from January 1, 2023, to EUR 150 per working day.
• Construction withholding tax procedure: As of the assessment period 2025, the construction deduction tax procedure is only possible electronically.
• Energetic modernization of an apartment: As of January 1, 2024, the homeowner’s pension subsidy can also be claimed for expenses for energetic measures for an owner-occupied apartment, provided that no other subsidies or another tax deduction are or were claimed.

It is clarified that there is no indirect fiscal unity if the majority of the voting rights in the tax group company already results from the direct participation of tax parent company in the (controlled) tax company.

In a further change, the existing rules on the transition from the system of tax adjustment items to the contribution solution have been supplemented. In this context, the effects of a contribution or return of contributions on the carrying amount of the investment in the tax group company are standardized.

The existing regulation for the return of contributions by EU or EEA corporations will be extended to all foreign corporations and thus also to third-country corporations as of January 1, 2023.

As of January 1, 2023, the term “entrepreneur” will be expanded to the effect that legal capacity under other regulations is irrelevant. Entrepreneurs can therefore also be partnerships without legal capacity, such as fractional ownership communities. 

Starting January 1, 2023, a tax rate of 0 % will apply to the acquisition/production of photovoltaic systems as well as corresponding electricity storage systems, including the accompanying installation. It is a prerequisite that the photovoltaic system is installed on or in the vicinity of private dwellings, apartments as well as public or other buildings used for activities serving the common good. This is already to be considered fulfilled if the installed gross capacity of the photovoltaic system does not exceed 30 kW (peak).

In light of an EU directive, § 22g of the German Value Added Tax Act (Umsatzsteuergesetz, UStG) will be newly included as of January 1, 2024, which regulates special recording and notification obligations for payment service providers for certain cross-border payments. This is intended to enable EU member states to better combat VAT fraud. 

Legal entities under public law that do not keep accounts either voluntarily or on the basis of statutory provisions, or that do not regularly prepare financial statements on the basis of annual inventories, may apply for VAT to be calculated on the basis of receipts (so-called actual taxation) from January 1, 2023.

In addition, it is clarified that the new regulations on VAT of the public sector will not be mandatory for all legal entities under public law until January 1, 2025.