The federal and state governments are planning tax relief for companies

Berlin. Less effort and tax bureaucracy: Finance Minister Lars Klingbeil (SPD) and his colleagues in the federal states are working on changes to the law that are intended to simplify corporate taxes. An agreement will be sought in the coming weeks. The Federal Ministry of Finance is talking about an “autumn package”.

North Rhine-Westphalia's Finance Minister Marcus Optendrenk (CDU) proposed eight simplifications in a key points paper, which are also being discussed between the federal and state governments. In the Federal Ministry of Finance, the proposals are generally viewed positively, as the head of the tax department explained at a discussion event.

A central element is the simplification of the so-called option model, with which partnerships will also be able to pay corporation tax in the future. This instrument has been around since 2022, but is hardly used. The planned simplification should make it “practical,” according to the key points paper from the NRW Ministry of Finance.

Specifically, the obligation to transfer so-called special business assets - such as land or shares that belong personally to a partner but serve the business - to the company should no longer apply. Many company owners consider the rule to be a serious disadvantage of the previous option model. “For the first time, partnerships have the opportunity to benefit from the corporate tax reduction without having to accept fundamental disadvantages,” says the paper.

Background: In Germany there are a million partnerships - unlike AGs or GmbHs, mostly owner-managed companies whose profits are attributed to the owners personally and taxed with income tax - including many small and medium-sized businesses. For them, income tax is essentially corporate tax. However, this could become an ever greater disadvantage in the coming years.

The black-red coalition has already decided to reduce corporate tax from 15 to ten percent in five steps from 2028. No comparable relief is planned for income tax.

On the contrary: as part of their reform program, the Union and the SPD agreed to expand the so-called rich tax - the highest tariff area of ​​income tax and therefore also relevant for partnerships - and to increase the tax rate. The current rate of 45 percent will in future apply from an annual income of 250,000 euros; previously it was just under 278,000 euros. At the same time, a new tax rate of 47 percent will be introduced, which will be due from 280,000 euros.

Consequence of the black and red tax plans: While corporations such as AGs or GmbHs can prepare for relief in the coming years, partnerships with high profits have to pay more.

There are already two instruments to mitigate unequal treatment. Profits that remain in the company and are invested can be favored. The second is the options model. The Union and SPD had already agreed in the coalition agreement to make it more practical. This is now to be done as part of the simplification package.

NRW Finance Minister Optendrenk also proposes measures to simplify trade tax. The assessment bases for trade and corporation tax should be aligned. Corporations pay both taxes. Because they are calculated differently, companies have to do the calculation twice - which costs time and money.

The paper also contains measures on international tax law. When implementing EU requirements such as the Tax Haven Defense Act, the European minimum standard should no longer be exceeded.

The package of measures relies on “structural reforms with a manageable impact on revenue,” says the paper. So there shouldn't be any major reductions in revenue for the tax authorities. This is also why the proposals are likely to be met with goodwill in the Federal Ministry of Finance.