Proposals for Reforming Corporate Tax Law
Attractive tax conditions are a key factor in Germany's appeal as a business location. These include not only the level of the tax burden but also a modern corporate tax system. To date, however, the German corporate tax system has created numerous obstacles for German companies. As a result, important, common, and economically necessary business activities are hindered. These include corporate restructurings, investments, and the financing of such investments.
Bureaucracy Hinders Investment and Transformation
Many areas of corporate tax law need to be modernized to make the current legislation more efficient, less bureaucratic, and more conducive to economic growth. We need a tax code that supports innovation and risk-taking and ensures entrepreneurial flexibility.
The goal of modernizing corporate taxation is not to reduce the tax burden, but rather to refine specific regulations. By reducing bureaucracy and improving the systemic consistency of corporate taxation, companies' competitiveness can be stabilized through incremental changes without any significant impact on tax revenue.
Advancing Structural Reform of Corporate Taxes
The tax framework for German companies must undergo structural reform, and barriers to investment in Germany must be removed. The BDI therefore proposes the following measures to modernize corporate taxation:
Introduce group taxation
Current Situation:
- A formally concluded profit and loss transfer agreement (Ergebnisabführungsvertrag, EAV) that remains effective for at least five years
Objective:
- A simple group taxation system based on a joint application by the companies within the tax group
- Minimum ownership requirement
- No mandatory five-year commitment
Ease the Interest Deduction Limitation
Revise the “gold-plating” of the EU directive:
- Convert the exemption threshold into a a tax-free allowance
- Repeal of the prohibition on carrying forward EBITDA and the partial restriction on the deduction of interest carried forward
- Repeal the restriction under which funding for public infrastructure projects must come from public budgets
Remove obstacles to restructuring
- Standardize holding periods
- Simplifying documentation requirements
- Enable the transfer of losses in common reorganizations of corporations
- Facilitate tax-neutral reorganizations and contributions in cases involving a tax consolidation group
- Move away from the overall plan concept, including in connection with contributions of special business assets under German tax law (Sonderbetriebsvermögen, or SBV)
Expand loss carryback
Loss carryback:
- Expand loss carrybacks to an unlimited amount or, at a minimum, permanently increase the limit to more than EUR 10 million
- Introduce a corresponding loss carryback for trade tax purposes
Loss carryforward:
- Completely eliminate minimum taxation for loss carryforwards