Draft stimulus bill includes measures previously announced by governing coalition
On 12 June 2020, the German government approved the draft economic stimulus bill proposed by the governing grand coalition on 3 June 2020 (see GTLN dated 5 June 2020) to combat the economic effects of the coronavirus (COVID-19) and to stimulate and reinvigorate the economy. The “Second bill on tax relief measures relating to the COVID-19 crisis” mainly includes measures described in the 3 June government proposal. The most important measures for businesses are likely to be the following:
In addition to the measures proposed by the governing grand coalition, the draft bill provides that the reinvestment period that allows for tax-neutral treatment of capital gains from the sale of certain business assets (as provided in section 6b of the Income Tax Code (ITC)) would be extended by one year if the related tax-free reserve otherwise would be eliminated in 2020 (generally, a four-year reinvestment period applies). A one-year extension also would apply for another provision that allows for a deduction of future investment expenses for certain small and medium-sized businesses (as provided in section 7g of the ITC; ordinarily, a general three-year reinvestment period applies).
The draft bill does not include any provisions regarding the proposed modernization of the current corporate income tax system and, in particular, the proposed introduction of an option for partnerships to elect to be subject to taxation in a manner similar to corporations.
The draft bill still must go through the legislative process and be approved by the upper and lower houses of the German parliament. However, as the governing grand coalition has the majority in both chambers, it can be expected that the package will receive final passage in a relatively short time period (likely during June 2020).
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