Growth Opportunities Act (WachChG)

Basics and objectives

The Growth Opportunities Act was finally passed by the Federal Council on March 22, 2024 and marks an important reform to strengthen Germany as a business location. The law is primarily aimed at providing tax relief for companies and reducing bureaucratic hurdles. With this law, the federal government has created a relief volume of 3.2 billion euros. The focus is particularly on promoting small and medium-sized enterprises and start-ups. The measures are intended to sustainably improve the liquidity situation of German companies. The law simplifies the tax system in key areas by increasing flat rates and thresholds. The reform aims to have a broad impact on the corporate landscape. The focus is on strengthening innovation and investment. The aim is to increase Germany’s competitiveness as a business location. Most of the regulations will come into force on January 1, 2024. The modernization of the economy is being actively promoted.

Tax relief and support measures

The declining balance method of depreciation for movable assets was introduced with a maximum percentage of 20 percent. For residential buildings, a declining balance depreciation of 5 percent is possible for six years. The limit for actual taxation for VAT was raised from 600,000 to 800,000 euros. Tax incentives for research have been significantly expanded and improved. The tax loss deduction has been made more flexible and extended. Taxation of retained earnings was optimized by increasing the amount of profit eligible for tax relief. Documentation requirements have been simplified and made less bureaucratic. Investment opportunities have been made more attractive through improved depreciation conditions. The tax treatment of employee share ownership has been simplified. The limits for various lump sums have been raised. Planning security for companies has been increased.

Digitization and modernization

The law promotes the mandatory introduction of electronic invoicing (e-invoicing). Digital communication with authorities is being systematically expanded and simplified. New technical standards are being defined for electronic invoicing. Process optimization through digitalization is the focus of the measures. The efficiency of administrative processes is to be significantly increased. The technical infrastructure is being modernized and made fit for the future. The standardization of digital processes is being driven forward. Interoperability between different systems will be improved. Data security will be guaranteed through clear guidelines. The transparency of business processes will be increased. International connectivity is ensured. Digitalization is established as a growth driver.

Reducing bureaucracy and simplifying administration

The thresholds for various documentation requirements have been significantly increased. The retention periods have been standardized and shortened in some cases. The obligations to provide evidence have been reduced to a minimum. Administrative procedures have been streamlined and digitized. Communication with authorities has been simplified and accelerated. Forms have been standardized and made more user-friendly. Reporting obligations have been harmonized and reduced. Processes have been made more efficient. Administrative costs have been reduced. Planning reliability has been increased. Legal certainty has been improved. Compliance has been made easier.

Investment promotion and innovation incentives

The law creates new incentives for investment in future technologies. Research funding has been strengthened through improved tax conditions. The investment conditions for residential construction have been optimized. Financing options for innovative projects have been expanded. The willingness to take risks is encouraged through tax relief. Capital formation is supported by improved framework conditions. Competitiveness is strengthened through targeted promotion. Innovative strength is increased through financial incentives. Future viability is secured through strategic investments. The attractiveness of the location is improved. The international competitive position is strengthened. Sustainability is promoted.

Effects on the SME sector

Small and medium-sized enterprises in particular will benefit from the relief provided by the law. The liquidity situation is strengthened by improved depreciation options. The ability to invest is increased through a reduced tax burden. Planning security is improved through clear framework conditions. Competitiveness is strengthened through targeted support. Innovative strength is increased through financial incentives. Digitalization is promoted through simplified processes. The bureaucratic burden will be noticeably reduced. Financing options are expanded. Future viability is secured. Jobs are protected. Location loyalty is strengthened.

Practical implementation and outlook

The measures will be implemented in stages by the end of 2024, with the tax authorities developing detailed application guidelines for practical implementation. Companies must adapt their internal processes to the new possibilities. The effectiveness of the measures will be continuously evaluated. International developments will be taken into account. The regulations can be adapted if necessary. Digitalization is being driven forward. Support measures are optimized. Future viability is ensured. Innovation is promoted. Competitiveness is strengthened. Sustainability is improved.