Tax lawyer and Smartsteuer CEO Stefan Heine explains how startups can now save a lot of money thanks to the new law
The new law is intended to help companies in the economic downturn. Now you just need to know how and where exactly. mrs/Getty
Last Friday, the Federal Council also approved the Growth Opportunities Act – after long debates and the work of a mediation committee. Because when the Bundestag approved the draft in November 2023, the states initially stopped the law. Their concern: it is costing the state far too much! It’s actually about a lot of money: tax relief and reductions in bureaucracy made possible by the new laws are expected to save companies more than three billion euros – which the state is missing as a result.
Why is the government doing this? To give the economy much-needed momentum. Finance Minister Christian Lindner (FDP) had proposed almost 50 tax policy measures that are intended to provide relief for companies in all sectors, including startups, in the economic downturn. Central to this are bonuses for climate protection investments, better creditability of losses in tax returns and the abolition of bureaucratic hurdles that cost time and money.
What has now been passed is a slimmed down version of the original law. And it can be implemented, for companies and the self-employed. Stefan Heine is CEO of Smartsteuer and a trained lawyer and specialist in tax law. Here he explains what startups need to know now in order to really benefit from the tax relief.
Stefan Heine is CEO of Smartsteuer and a trained lawyer and specialist in tax law. At Smartsteuer, he and his team are digitizing one of the most analog processes in Germany: the tax return. smart tax GmbH
The good news: The law actually offers some notable incentives for startups, especially when it comes to income and corporate tax.
1. Temporary reintroduction of the degressive deduction for wear and tear (Depreciation)
A sentence monster, but with weight for startups: The fact that there is a temporary reintroduction of declining balance depreciation for movable fixed assets allows startups to write off their investments in equipment and technology more quickly. Specifically, this means that the acquisition or production costs for assets acquired or manufactured after March 31, 2024 and before January 1, 2025 can be depreciated using the declining balance method. The measure is relevant for startups in order to preserve liquidity. Because with depreciation it can reduce a tax base in the first few years after an investment.
2. Increase in special depreciation to up to 40 percent
The increase in special depreciation to up to 40 percent of the investment costs for small and medium-sized companies offers tax advantages for startups. This allows founders to make their investments in fixed assets more effectively. And of course the law aims to ensure that more is invested in new technologies and equipment.
3. Extended loss carryforward
Up to a base amount of one million euros, or two million euros for spouses/civil partnerships, the loss carryforward is possible without limitation for each loss carryforward year. For everything that exceeds the basic amount, the expanded amount applies due to the Growth Opportunities Act Loss carryforward of 70 percent of the total amount of income for the year in which losses were carried forward. This is a crucial adjustment for startups. Because: Especially in the early years, founders operate at losses. The new law allows more of these losses to be offset against future profits, significantly reducing the tax burden in more profitable times.
4. Corporate tax option
Startups organized as partnerships can now choose whether they want to be taxed as a corporation. This flexibility opens up strategic planning opportunities. There are now more options for action, particularly with regard to investments and attracting capital, as corporate taxation can offer tax advantages in certain situations.
5. Increase in the exemption amount for gifts
Gifts maintain friendship, even with business partners. The increase in the allowance for business gifts from EUR 35 to EUR 50 is good for everyone who likes to maintain their network.
6. Special regulation for electric vehicles
The 1 percent rule for the private use of company electric vehicles will be made more favorable: with the increase in the gross list price from 60,000 to 70,000 euros, up to which the discounts apply, the use of electric vehicles will also become more attractive in startups. If the gross list price is not more than 70,000 euros, only a quarter of a percent of the gross list price is to be applied for private use of a company vehicle (instead of 1 percent). The regulation applies to electric cars purchased after December 31, 2023.
7. Mandatory use of e-invoice
Not a direct tax change, but still very relevant: electronic invoicing is becoming the new normal. This supports digital document flow and reduces paper work.
The Growth Opportunities Act originally provided for extensive relief that would also have been relevant for startups (all changes made by the Mediation Committee and what now applies are clearly shown at haufe.de broken down). Nevertheless, the slimmed-down law is also a step in a direction that promotes startups and the economy.